This study examines the impact of trade liberalization on Small and Medium Scale Enterprises (SMEs) growth in Nigeria, as a strategy for the diversification of the economy through trade liberalization especially on the SMEs sector. Data used for this study was sourced from Central Bank of Nigeria (CBN) 2016 statistical bulletin and bureau of statistics from 1986 to 2016. SMEs outputs was used as dependent variable, while trade openness which is a proxy for trade liberalization, import, export and exchange rate were used as the independent variables. The study adopted the Autoregressive Distributed lag (ARDL) estimation for analyses; pre-diagnostic, post-diagnostic test and unit root test was carried out on the variables to find out if they were stationary in order to ascertain the exact estimation techniques, the ADF result found that trade openness was stationary at level while, SMEs output, export, import and exchange rate were stationary at first difference. This justifies the adoption of the ARDL method of analysis. The result of the findings revealed that Trade openness is positive and is statistically significant to SMEs output for the period under consideration, this implies that trade openness enables the expansion of economic opportunities by enlarging markets and enhancing knowledge spill over, hence the more trade is liberalized the more the output of SMEs in Nigeria. The study concluded that trade liberalization is a veritable policy tool through which the SMEs can grow and perhaps will also lead to the growth of the Nigeria economy as a whole. The study recommended among others that Government should ensure that the economy is open to the extent that would have greater impact on the growth of SMEs. Small and medium scale enterprises in Nigeria should be encouraged by government, by giving those SMEs incentives, subsidies and improving the technological and infrastructural development so as to increase the sectors contribution to GDP, exportation of its manufactured product and employment in the country.
Keywords: Trade liberalization, SMEs, Import, Export, Exchange rate and Nigeria.