author(s)
Danjuma Ahmad and Mohammed Bawuro Buba

abstract
This study examined the effect of cash flow on banks’ lending to SMEs in Nigeria. Although, cash flow lending is getting recognition nowadays, little is known about its impact on banks’ lending to SMEs particularly in Nigeria. Studies in the past dwelled much on the assessment of government programmes to support the creation of SMEs, but grossly overlooked the analytical impact of such policies on efficient allocation of credit to SMEs. As an attempt to fill this gap, this study answered the following questions; what factors determine cash flow lending to SMEs in Nigeria? To answer the question we used a data consisting of 49 non-financial firms listed in the Nigerian stock exchange for the period 2005 to 2018 and employed both pooled and random effect estimation techniques. The result from the study shows that both current and previous cash flow positively and significantly affect the amount of credit granted to firms by the banks. Additionally, deterioration of firms’ net situations reduces the amount of credit granted by banks to firms. The study thus, recommends that Government should remove all unnecessary bureaucratic hurdles and discrimination, establish strategic and robust venture capital sector, crowd funding and other forms of financial institutions such as micro finance institutions to make funds available at affordable rate to critical sectors such as agriculture and manufacturing.