Fuel Subsidy Removal and Its Negative Impact on Small and Medium Scale Enterprises

Abstract

Fuel subsidy has been a leverage that has aided SMEs operations in Nigeria as it has helped in reducing the amount of resources spent on fuel by SMEs. Thus, the removal has no doubt negatively affected the activities and operations of SMEs across the country. This study investigated the negative impact of fuel subsidy removal on SMEs in Anambra State. The study adopted a mixed method research that used structured questionnaire and In-depth Interview (IDI) in collecting data from 105 SMEs systematically selected from the 21 Local Government Areas in the state. Data collected for the study was processed using Statistical Package for Social Sciences (SPSS). The result of the quantitative data was analysed using descriptive statistics (frequency tables, charts and graphs) while the qualitative data was analyzed using thematic analysis. The study hypothesis was tested using Chi-square inferential statistics. The study found that fuel subsidy removal has a very high negative impact on SMEs in Anambra State. The study also found that the negative impact of fuel subsidy removal on SMEs include increase in production cost, reduced profit as a result of high overhead costs, low sales and income resulting from low patronage and financial strain in the general activities of SMEs. The study thus recommends that strategic planning and policies that can combat the negative effect of fuel subsidy removal should be put in place by the Federal Government as this will help SMEs thrive and still carry out their operations without many difficulties irrespective of fuel subsidy removal.