FISCAL POLICY AND SMALL AND MEDIUM SCALE ENTERPRISES PERFORMANCE IN NIGERIA
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Ariyibi Mayowa Ebenezer(1*)
Department of Banking and Finance, Olabisi Onabanjo University
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Efemena Emily O(2)
Finance Department, Aradel Energy Limited
-
Olowofela Enitan O(3)
Department of Banking and Finance, Olabisi Onabanjo University
(*) Corresponding Author
Keywords:
Fiscal Policy, SME’s, Government Expenditure, Taxation and ARDL
Abstract
The macroeconomic policies, which fiscal policy is inclusive of, are very germane in determining the performance level in the country, most especially in determining the developmental quota that the small and medium scale enterprises would contribute to the economy, so poor usage of the fiscal policy can stifle the effectiveness of the SMEs’ performance, and their contributive role has a source of growth in an economy. Based on their relevance, this study examines the impact of fiscal policy on small and medium-scale enterprises' performance in Nigeria. The secondary time series data was sourced from the Central Bank Statistical Bulletin and the National Bureau of Statistics from the period 1991 to 2022. The ARDL (Auto-Regressive Distributed Lag) was employed to draw inferences after being informed by the unit-root test. The findings revealed that the expansionary measure of fiscal policy shows that government re-recurrent expenditure has a negative insignificant effect on small and medium-scale enterprises' total credit from commercial banks. Government capital expenditure has a negative significant effect on small and medium-scale enterprises' total credit from commercial banks. The contractionary measure of fiscal policy shows that value-added tax has a positive significant effect on small and medium-scale enterprises' total credit from commercial banks. Company income tax has a negative significant effect on small and medium-scale enterprises' total credit from commercial banks, while electricity consumption has a negative insignificant effect on small and medium-scale enterprises' total credit from commercial l banks. It is therefore recommended that policymakers should enhance the efficiency of capital expenditure to support SME-enabling projects and infrastructure.
Keywords: Fiscal Policy; SME’s; Government Expenditure; Taxation and ARDL
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References
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Adekunle, W., Adesanya, H. T., & Collins, O. (2022). Impact of fiscal policy on the growth of small and medium-sized enterprises in Nigeria. DBN Journal of Economics and Sustainable Growth, 4(3), 100-125.
Adewale, K., & Ojo, B. (2024). Impact of government policies on the export performance of SMEs in Nigeria: A focus on the agricultural sector. Journal of International Business Studies, 30(4), 521-536. https://doi.org/10.1016/j.jibstud.2023.102034.
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Ahuru, R. R. (2021) Reforms and Small And Medium Enterprises performance In Nigeria: An Empirical Analysis University of Benin publications
Alabi, F., David, J., &Aderinto, O. (2019). The impact of government policies on business growth of SMEs in southwestern Nigeria. International Journal of Management Studies and Social Science Research, 1(2), 1-14.
Atawodi, W & Ojeka, S. (2013). Factors that affect tax compliance among small & medium enterprises International Journal of Business and Management 7(12), 13- 21
Available at:https://doi.org/10.14207/ejsd.2014.v3n1p101.
Balu, P. E. (2015). Fiscal policy measures for SMEs. Calitatea, 16(S1), 682.
Basil, A. (2005). Small and Medium Enterprises (SMEs) in Nigeria: problems and prospects.
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Burgess, R. and Stern, N. (1993). Taxation and Development. Journal of Economic Literature, 31(2): 762-830.
Censon, J. L., Sanque, H. F., Villegas, R. E., & Cabauatan, R. (2023). Impact of fiscal policies of the Philippines, Thailand, and Vietnam on MSMEs and their relative effects on GDP growth. UJoST-Universal Journal of Science and Technology, 2(1), 1-25.
Chidume, U. P., &Nenbee, S. G. (2022). Small and medium-scale enterprises' activities and economic development in Obio-Akpor Local Government Area, Rivers State, Nigeria. Mediterranean Journal of Social Sciences, 13(1), 118-118
Claudiu, C, Ion, P., Corina, M. & Simona, C. S(2019). Determinants of SMEs’ performance: evidence from European countries, Economic Research- Ekonomska Istraživanja, 32:1, 1602-1620,
Cook, P., and Nixson, F. (2000). Finance and Small and Medium-Sized Enterprise Development. Finance and Development Research Programme Working Paper Series, University of Manchester
DiMaggio, P., & Powell, W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48(2), 147-160. https://doi.org/10.2307/2095101.
DOI: 10.1080/1331677X.2019.1636699.
Ehikioya, I. L., Uduh, D. M., & Edeme, R. K. (2018). Relative impact of fiscal and monetary policy on the growth of small and medium scale enterprises in Nigeria. Quantitative Economics Research, 1(1), 1-12.
Ehikioya, I. L., Uduh, D. M., &Edeme, R. K. (2018). The relative impact of fiscal and monetary policy on the growth of small and medium-scale enterprises in Nigeria. Quantitative Economics Research, 1(1), 1-12.
Eke, F. A., Ifere, E. O., Eke, I. C., & Mbang, T. B. (2024). Macroeconomic Analysis of Fiscal Policy And Small And Medium-Scale Enterprises Output In Nigeria. Gusau Journal Of Economics And Development Studies, 5(1), 144-157.
Etale, L. M., & Bibiere, O. L. (2021). An evaluation of the impact of SMEs development on economic growth in Nigeria. Research Journal of Finance and Accounting, 12(8), 54-70.
Evans, P., Kariuki, P., & Wafula, F. (2022). Effect of fiscal policy on foreign direct investment inflows in Kenya. International Journal of Finance and Accounting, 7(1), 33-59.
Eze, O. R., & Ogiji, F. O., (2013) Impact of fiscal policy on the manufacturing sector output in Nigeria: An error correction analysis. International Journal of Business And Management Review (IJBMR), 1(3), 35-55.
Gbande, C., Udoh, F. S., & Frank, B. I. (2018). Effect of fiscal policy on growth of small-medium scale enterprises in Nigeria. Journal of Management Sciences, 16(4), 122-142.
Gbande, C., Udoh, F. S., & Frank, B. I. (2018). Effect of fiscal policy on the growth of SMEs in Nigeria. Sahel Analyst: Journal of Management Sciences, 16(4), 122-139.
Hassan, O. (2003). The Contribution of Various Schemes to the Growth of SMEs in Nigeria, Abuja Habib Nig. Ltd.
https://doi.org/10.4102/jef.v15i1.746.
https://www.researchgate.net/publication/348740232.
Idris, M. (2019). Relative impact of monetary and fiscal policy on output growth in a small-open economy. American Research Journal of Humanities & Social Science (ARJHSS), 2(08), 26-38.
Ikechi, K. S., Ugwueze, A. C. & Segun, A. M. (2022). Fiscal Policy Tools and Economic Growth in Nigeria. International Journal of Innovation and Economic Development, 5(8), 25-41.
Julius, A. A., Agbolade, O. K., & Johnson, A. O., (2016). Strategic management and Small and Medium Enterprises (SMEs) development: A review of literature. International Review of Management and Business Research 5 Issue.1
Kombo, A. (2011). An evaluation of the impact of risk management strategies on microfinance institutions. Financial sustainability: a case of selected micro finance institutions in Kisii municipality, Kenya. Educational Research, 2(5): 1149-1153.
Kongolo, M. (2010). Job creation versus job shedding and the role of SMEs in economic development. African Journal of Business management, 4 (11), 2288-2295
Kumar, N. K. (2023). Autocorrelation and Heteroscedasticity in Regression Analysis. Journal of Business and Social Sciences, 5(1), 9-20.
Lihong, Z. (2023). Study on Fiscal Policies for Small and Micro Enterprises under the Economic Crisis. Financial Engineering and Risk Management, 6(3), 34-40.
Mankiw, N. G., (2000). The savers-spenders theory of fiscal policy. Paper prepared for the meeting of the American Economic Association.
Mba, O. A., &Emeti, I. E. (2014). Issues, challenges and prospects of small and medium scale enterprises (SMEs) in Port-Harcourt city, Nigeria. European Journal of Sustainable Development, 3(1), 101-114.
Mbatu, R. S., &Lukong, P. (2019). Tax administration and the performance of small and medium-sized enterprises in Cameroon. Journal of Business and Management Sciences, 7(3), 93- 103
Mohamed, Y. & Mnguu, Y. O. (2014). Fiscal and monetary policies: Challenges for small and medium enterprises (SMEs) development in Tanzania. International Journal of Social Sciences and Entrepreneurship, 1 (10), 305-320.
Muindi, N.N. & Mukorera, S.Z.E. (2022). Implications of fiscal policy on household consumption in Kenya: A nonlinear auto-regressive distributed lag approach. Journal of Economic and Financial Sciences, 15(1), a746.
Nwoye, U. J., & Akan, D. C. (2023). Appraising fiscal policy implementation in Anambra State, Nigeria: Effects on the performance of Micro, Small and Medium Enterprises. Journal of Global Accounting, 9(3), 288-313.
Odutola, O., Oyekola, O. & Ajayi, J. O. (2021). Fiscal Policy and SMEs Sustainability: Post- Covid19 Era in Nigeria. IOSR Journal of Business and Management, 23(9), 7-11.
Ofoegbu, E. O., Akanbi, P. A. and Joseph, A. T. (2013). Effect of Contextual Factors on the Performance of SMEs in Nigeria: A Case Study of Ilorin Metropolis. Advances in Management and Applied Economics, 3(1):95-114.
Oke, M. O., (2013). Budget implementation and economic growth in Nigeria. Developing country studies, 3 (13), 1-7.
Olufemi, O. J., Olufemi, O. A., & Favour O, O. L. U. S. H. O. L. A. (2024). Fiscal Policy and Small-Medium Scale Enterprise, Implication on Economic Growth in Nigeria. International Journal of Humanities Social Science and Management (IJHSSM): 4 (4),12- 20.
Ovat, O. O., (2013) Liquidity constraints and entrepreneurial financing in Nigeria: The fate of fresh graduate entrepreneurs. Global Journal of Management and Business Research. 13(9): 35-42.
Salami, C. G. E., Ekakitie, S. E., & Ebinim, L. O. (2023). Impact of government policy on entrepreneurship growth and development of small-scale business. Journal of Global Social Sciences, 4(14), 73-102.
Scott, W. (2014). Institutions and organizations: Ideas, interests, and identities. Publisher.
Simkovic, M. (2012).The knowledge tax. University of Chicago Law Review, 82(4), 4. SMEDAN, (2013). Survey report on micro, small and medium enterprises in Nigeria (SMEDAN).
Tabet, R., & Onyeukwu, P. E. (2019). Multiple taxation and small and medium scale enterprises (SMEs) financial performance in Abuja, Nigeria. World Journal of Innovative Research, 6(2), 65-68.
Tendengu, S., Kapingura, F. M., & Tsegaye, A. (2022). Fiscal Policy and Economic Growth in South Africa. Economies, 10(9), 204.
Twesige, D., & Gasheja, F. (2019). Effect of tax incentives on the growth of small and medium- sized enterprises (SMEs) in Rwanda: A case study of SMEs in Nyarugenge district. Journal of Accounting and Taxation, 11(5), 89-98.
Udo, M. Z., & Mohammed, A., M. (2022) Micro, small and medium-scale enterprise (MSMES) financing and economic growth in Nigeria: evidence from error correction model. Journal Of Economic, Business Management And Administration, 3(2), 12-30
Weber, M. (1947). The theory of social and economic organization. Publisher.
Whang, Y. J. (1998). A test of autocorrelation in the presence of heteroskedasticity of unknown form. Econometric Theory, 14(1), 87-122.
Adanlawo, E. F., & Vezi-Magigaba, M. (2022). Exploring the impact of tax policies on small and medium scale enterprises (SMEs) performance in Nigerian Economy. The Business & Management Review, 13(1), 7-15.
Adekunle, W., Adesanya, H. T., & Collins, O. (2022). Impact of fiscal policy on the growth of small and medium-sized enterprises in Nigeria. DBN Journal of Economics and Sustainable Growth, 4(3), 100-125.
Adewale, K., & Ojo, B. (2024). Impact of government policies on the export performance of SMEs in Nigeria: A focus on the agricultural sector. Journal of International Business Studies, 30(4), 521-536. https://doi.org/10.1016/j.jibstud.2023.102034.
AfDB. (2021). Small and medium-sized enterprises: Key drivers of growth in Africa. African Development Bank. https://www.afdb.org/en/news-and-events/small-and-medium-sized- enterprises-key-drivers-growth-africa
Ahuru, R. R. (2021) Reforms and Small And Medium Enterprises performance In Nigeria: An Empirical Analysis University of Benin publications
Alabi, F., David, J., &Aderinto, O. (2019). The impact of government policies on business growth of SMEs in southwestern Nigeria. International Journal of Management Studies and Social Science Research, 1(2), 1-14.
Atawodi, W & Ojeka, S. (2013). Factors that affect tax compliance among small & medium enterprises International Journal of Business and Management 7(12), 13- 21
Available at:https://doi.org/10.14207/ejsd.2014.v3n1p101.
Balu, P. E. (2015). Fiscal policy measures for SMEs. Calitatea, 16(S1), 682.
Basil, A. (2005). Small and Medium Enterprises (SMEs) in Nigeria: problems and prospects.
Bodunrin, O. S. (2016). The impact of fiscal and monetary policy on Nigerian economic growth. Online at https://mpra.ub.uni-muenchen.de/92811/.
Bouey, J. (2020). Assessment of COVID-19’s Impact on Small and Medium-Sized Enterprises: Implications from Chinafile:///C:/Users/USER/Desktop/SMEs%20and%20Fiscal%20Policy%206.
Burgess, R. and Stern, N. (1993). Taxation and Development. Journal of Economic Literature, 31(2): 762-830.
Censon, J. L., Sanque, H. F., Villegas, R. E., & Cabauatan, R. (2023). Impact of fiscal policies of the Philippines, Thailand, and Vietnam on MSMEs and their relative effects on GDP growth. UJoST-Universal Journal of Science and Technology, 2(1), 1-25.
Chidume, U. P., &Nenbee, S. G. (2022). Small and medium-scale enterprises' activities and economic development in Obio-Akpor Local Government Area, Rivers State, Nigeria. Mediterranean Journal of Social Sciences, 13(1), 118-118
Claudiu, C, Ion, P., Corina, M. & Simona, C. S(2019). Determinants of SMEs’ performance: evidence from European countries, Economic Research- Ekonomska Istraživanja, 32:1, 1602-1620,
Cook, P., and Nixson, F. (2000). Finance and Small and Medium-Sized Enterprise Development. Finance and Development Research Programme Working Paper Series, University of Manchester
DiMaggio, P., & Powell, W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48(2), 147-160. https://doi.org/10.2307/2095101.
DOI: 10.1080/1331677X.2019.1636699.
Ehikioya, I. L., Uduh, D. M., & Edeme, R. K. (2018). Relative impact of fiscal and monetary policy on the growth of small and medium scale enterprises in Nigeria. Quantitative Economics Research, 1(1), 1-12.
Ehikioya, I. L., Uduh, D. M., &Edeme, R. K. (2018). The relative impact of fiscal and monetary policy on the growth of small and medium-scale enterprises in Nigeria. Quantitative Economics Research, 1(1), 1-12.
Eke, F. A., Ifere, E. O., Eke, I. C., & Mbang, T. B. (2024). Macroeconomic Analysis of Fiscal Policy And Small And Medium-Scale Enterprises Output In Nigeria. Gusau Journal Of Economics And Development Studies, 5(1), 144-157.
Etale, L. M., & Bibiere, O. L. (2021). An evaluation of the impact of SMEs development on economic growth in Nigeria. Research Journal of Finance and Accounting, 12(8), 54-70.
Evans, P., Kariuki, P., & Wafula, F. (2022). Effect of fiscal policy on foreign direct investment inflows in Kenya. International Journal of Finance and Accounting, 7(1), 33-59.
Eze, O. R., & Ogiji, F. O., (2013) Impact of fiscal policy on the manufacturing sector output in Nigeria: An error correction analysis. International Journal of Business And Management Review (IJBMR), 1(3), 35-55.
Gbande, C., Udoh, F. S., & Frank, B. I. (2018). Effect of fiscal policy on growth of small-medium scale enterprises in Nigeria. Journal of Management Sciences, 16(4), 122-142.
Gbande, C., Udoh, F. S., & Frank, B. I. (2018). Effect of fiscal policy on the growth of SMEs in Nigeria. Sahel Analyst: Journal of Management Sciences, 16(4), 122-139.
Hassan, O. (2003). The Contribution of Various Schemes to the Growth of SMEs in Nigeria, Abuja Habib Nig. Ltd.
https://doi.org/10.4102/jef.v15i1.746.
https://www.researchgate.net/publication/348740232.
Idris, M. (2019). Relative impact of monetary and fiscal policy on output growth in a small-open economy. American Research Journal of Humanities & Social Science (ARJHSS), 2(08), 26-38.
Ikechi, K. S., Ugwueze, A. C. & Segun, A. M. (2022). Fiscal Policy Tools and Economic Growth in Nigeria. International Journal of Innovation and Economic Development, 5(8), 25-41.
Julius, A. A., Agbolade, O. K., & Johnson, A. O., (2016). Strategic management and Small and Medium Enterprises (SMEs) development: A review of literature. International Review of Management and Business Research 5 Issue.1
Kombo, A. (2011). An evaluation of the impact of risk management strategies on microfinance institutions. Financial sustainability: a case of selected micro finance institutions in Kisii municipality, Kenya. Educational Research, 2(5): 1149-1153.
Kongolo, M. (2010). Job creation versus job shedding and the role of SMEs in economic development. African Journal of Business management, 4 (11), 2288-2295
Kumar, N. K. (2023). Autocorrelation and Heteroscedasticity in Regression Analysis. Journal of Business and Social Sciences, 5(1), 9-20.
Lihong, Z. (2023). Study on Fiscal Policies for Small and Micro Enterprises under the Economic Crisis. Financial Engineering and Risk Management, 6(3), 34-40.
Mankiw, N. G., (2000). The savers-spenders theory of fiscal policy. Paper prepared for the meeting of the American Economic Association.
Mba, O. A., &Emeti, I. E. (2014). Issues, challenges and prospects of small and medium scale enterprises (SMEs) in Port-Harcourt city, Nigeria. European Journal of Sustainable Development, 3(1), 101-114.
Mbatu, R. S., &Lukong, P. (2019). Tax administration and the performance of small and medium-sized enterprises in Cameroon. Journal of Business and Management Sciences, 7(3), 93- 103
Mohamed, Y. & Mnguu, Y. O. (2014). Fiscal and monetary policies: Challenges for small and medium enterprises (SMEs) development in Tanzania. International Journal of Social Sciences and Entrepreneurship, 1 (10), 305-320.
Muindi, N.N. & Mukorera, S.Z.E. (2022). Implications of fiscal policy on household consumption in Kenya: A nonlinear auto-regressive distributed lag approach. Journal of Economic and Financial Sciences, 15(1), a746.
Nwoye, U. J., & Akan, D. C. (2023). Appraising fiscal policy implementation in Anambra State, Nigeria: Effects on the performance of Micro, Small and Medium Enterprises. Journal of Global Accounting, 9(3), 288-313.
Odutola, O., Oyekola, O. & Ajayi, J. O. (2021). Fiscal Policy and SMEs Sustainability: Post- Covid19 Era in Nigeria. IOSR Journal of Business and Management, 23(9), 7-11.
Ofoegbu, E. O., Akanbi, P. A. and Joseph, A. T. (2013). Effect of Contextual Factors on the Performance of SMEs in Nigeria: A Case Study of Ilorin Metropolis. Advances in Management and Applied Economics, 3(1):95-114.
Oke, M. O., (2013). Budget implementation and economic growth in Nigeria. Developing country studies, 3 (13), 1-7.
Olufemi, O. J., Olufemi, O. A., & Favour O, O. L. U. S. H. O. L. A. (2024). Fiscal Policy and Small-Medium Scale Enterprise, Implication on Economic Growth in Nigeria. International Journal of Humanities Social Science and Management (IJHSSM): 4 (4),12- 20.
Ovat, O. O., (2013) Liquidity constraints and entrepreneurial financing in Nigeria: The fate of fresh graduate entrepreneurs. Global Journal of Management and Business Research. 13(9): 35-42.
Salami, C. G. E., Ekakitie, S. E., & Ebinim, L. O. (2023). Impact of government policy on entrepreneurship growth and development of small-scale business. Journal of Global Social Sciences, 4(14), 73-102.
Scott, W. (2014). Institutions and organizations: Ideas, interests, and identities. Publisher.
Simkovic, M. (2012).The knowledge tax. University of Chicago Law Review, 82(4), 4. SMEDAN, (2013). Survey report on micro, small and medium enterprises in Nigeria (SMEDAN).
Tabet, R., & Onyeukwu, P. E. (2019). Multiple taxation and small and medium scale enterprises (SMEs) financial performance in Abuja, Nigeria. World Journal of Innovative Research, 6(2), 65-68.
Tendengu, S., Kapingura, F. M., & Tsegaye, A. (2022). Fiscal Policy and Economic Growth in South Africa. Economies, 10(9), 204.
Twesige, D., & Gasheja, F. (2019). Effect of tax incentives on the growth of small and medium- sized enterprises (SMEs) in Rwanda: A case study of SMEs in Nyarugenge district. Journal of Accounting and Taxation, 11(5), 89-98.
Udo, M. Z., & Mohammed, A., M. (2022) Micro, small and medium-scale enterprise (MSMES) financing and economic growth in Nigeria: evidence from error correction model. Journal Of Economic, Business Management And Administration, 3(2), 12-30
Weber, M. (1947). The theory of social and economic organization. Publisher.
Whang, Y. J. (1998). A test of autocorrelation in the presence of heteroskedasticity of unknown form. Econometric Theory, 14(1), 87-122.
Published
2025-03-01
How to Cite
Ebenezer, A., O, E., & O, O. (2025). FISCAL POLICY AND SMALL AND MEDIUM SCALE ENTERPRISES PERFORMANCE IN NIGERIA. Journal of Management : Small and Medium Enterprises (SMEs), 18(1), 55-71. https://doi.org/10.35508/jom.v18i1.19804
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