INVESTIGATING THE FINANCIAL RESILIENCE OF SMES IN NIGERIA POST-SUBSIDY ERA

1.1 Introduction

Financial resilience is referred to the ability of an SME to survive, adapt and grow during turbulent times (Kuckertz et al., 2020). A subsidy is a financial contribution by a government that confers a benefit to a producer, contractor or an entrepreneur. In the case of Nigeria, subsidies are mostly granted to pseudo-entrepreneurs who are producing nothing tangible and adding no real value to the country. The small business strategic plan must communicate the vision and mission of owners to employees and customers. According to Mohd and Mohamed (2013), small scale businesses are the economic backbone of nations and they comprise the largest proportion of businesses in most economies as well as frequently offer the greatest potential for job creation (Mohd and Mohamed, 2013).

As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Research hypothesis and questions, Limitation of the study and Definition of terms.

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1.2 Background of Study

Historical facts show that prior to the late 19th century, cottage industries controlled the economy of Europe. The industrial revolution changed the status quo and introduced mass production model, which triggered an unexpected reappraisal of the role and importance of small and medium sized enterprise in the global economy. Findings by economics over the years showed that small firms and entrepreneurships play a much more important role in economic growth and development. Many economics developed and developing here come to realize the value of small business. They are seen to be characterized by dynamism, within innovations, efficiency, and their small size allow for faster decision making process.

Nigeria’s SMEs (general an umbrella term for firms with less than 250 employees), at present experienced a lot of problems and hardship and this is not just as a result of the economic downfall. There are a number of bottlenecks, including serious under capitalization with difficulty in gaining access to bank credits and other financial markets, corruption and a lack of transparency but most damagingly, a seemingly lack of government interest in and support for the roles that SMEs play in national economic development and competitiveness.

In the words of Kauffmann (2010: 128) subsidy removal as a programme enjoyed relative success with limited social stress, in others cases the exercise was deemed a failure. Elimination of subsidies on essential commodities like fuel has been known to precipitate social disolocation and in the extreme led to street riots and civil strike. Fuel subsidy removal programmes are sensitive to economy structure, level of development of the country, political system and the state of the economy. There is evidence that the more successful countries have taken a phase or gradual approach, have engage in conscientious research prior to implementation and followed a rigorous approach to policy making. The effective communication and fair level of trust between citizens and government may be the other critical success factors in such an exercise. We examine Nigeria’s proposal for subsidy removal against this back drop.

The Nigerian government extends subsidies to petroleum products, such as gasoline and kerosene, in order to artificially maintain low prices for consumers. These subsidies aim to alleviate the burden of soaring fuel expenses on the general population. Nonetheless, the subsidy system has been mired in controversy due to concerns regarding corruption, inefficiency, and the substantial financial strain it places on the government (Amusa & Olanrewaju, 2018).

Subsidies are immensely valuable as they seek comprehensive support, particularly from governmental entities. These subsidies offer essential aid to nascent or struggling industries and entrepreneurs, easing their burdens and encouraging novel developments by providing financial support for their endeavors. Oftentimes, these sectors receive inadequate support through general economic activities or face challenges from competing economies. Subsidies are widely acknowledged as pivotal economic intervention tools for addressing market failures. It is crucial to acknowledge that they wield substantial sway over entrepreneurial endeavors (Gorg and Strobl, 2007), fortify the competitive edge in exports (Desai and Hines, 2008), elevate production efficiency (Azzimonti et al., 2008), and function as pivotal reservoirs of funding, enabling entrepreneurs to overcome capital deficiencies (Claro, 2006).

Therefore, in Nigeria where the research was carried out, the activities that was conducted is to know the Financial Resilience of SMEs in Nigeria Post-Subsidy Era.

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1.3 Statement of Problems

Investigation revealed that the growing significance of SMES cannot be overemphasized in view of its contribution to the economic growth of the country through the provision of employment for a large segment of the population and revenue derivation. The problem facing small and medium scale business as a result of the economic downfall, there are a number of bottlenecks, including services under capitalization with difficulty in gaining access to bank credits and other financial markets.

The removal of fuel subsidy by the federal government also generated inflation in the country which bought about a high cost of fuel and other items in the market, not only did it bring about inflation, it was also accompanied with mass poverty because the price of goods and services increased while the income of people still remained constant. Nigerians were also traumatized by the new of the new policy and it also brought about violent demonstrations which distorted the peace and tranquility of the country. It was these problems that prompted the researcher to carry a thorough research on the impact of fuel subsidy removal on the Nigerian economy.

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1.4 Aim and Objectives of Study

The aim of the study is to investigate the Financial Resilience of SMEs in Nigeria Post-Subsidy Era. In achieving this aim, the following specific objectives were laid out as follows:

1. To investigate the effects of poor financial resilience strategic planning on SMEs in Nigeria Post-Subsidy Era;
2. To investigate the financial challenges faced by SMEs in Nigeria Post-Subsidy Era;
3. To examine the integration of SMEs financial resilience strategies needed in Nigeria Post-Subsidy Era; and
4. To determine the relationship between effective tax policy and regulations on SME financial resilience in Nigeria Post-Subsidy Era.

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1.5 Research Questions

The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:

• What are the effects of poor financial resilience strategic planning on SMEs in Nigeria Post-Subsidy Era?
• What is the integration of SMEs financial resilience strategies needed in Nigeria Post-Subsidy Era?
• What are the financial challenges faced by SMEs in Nigeria Post-Subsidy Era?
• What is the relationship between effective tax policy and regulations on SME financial resilience in Nigeria Post-Subsidy Era?

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1.6 Research Hypothesis

In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.

Hypothesis One

• H0: There is no significant relationship between effective tax policy and regulations on SME financial resilience in Nigeria Post-Subsidy Era
• H1: There is significant relationship between effective tax policy and regulations on SME financial resilience in Nigeria Post-Subsidy Era

Hypothesis Two

• H0: There are no financial challenges faced by SMEs in Nigeria Post-Subsidy Era
• H1: There are financial challenges faced by SMEs in Nigeria Post-Subsidy Era

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1.7 Significance of Study

The result of the findings will assist the government in enhancing the financial resilience of SMEs in Nigeria Post-Subsidy Era. This study will be of immense benefit to other researchers who intend to know more on this study and can also be used by non-researchers to build more on their research work. This study contributes to knowledge and could serve as a guide for other study.

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1.8 Scope of Study

The scope of the research is focused on Investigating the Financial Resilience of Small and Medium Scale Enterprises (SMEs) in Nigeria Post-Subsidy Era.

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1.9 Limitations of the Study

During the course of this study, there were some problems encountered which stood as limitations to the research work. Some of the limitations include:

1. Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
2. Research Material: availability of research material is a major setback to the scope of the study.
3. Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
4. Initial Cooperation Delay from Respondents: A particular limitation of this work came as a result of the respondent refusal to offer their cooperation at the initial time they were contacted. This contributed in making the success of this research study difficult.

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1.10 Definition of Terms

Strategic Planning:

This is a process of defining organization strategic, decision and making decisions on allocation its resources, to measure this strategy, includes its capital and people.

Organization:

This is an organized body of persons or cooperate bodies aiming towards a particular objective.