An Examination of the Influence of Fuel Subsidy Removal on SME Profitability in Nigeria: A Case Study of SMEs in Abuja
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Background of the Study
The removal of fuel subsidies in Nigeria has been a contentious economic reform aimed at addressing fiscal deficits and reallocating resources. While this policy has macroeconomic benefits, it also imposes increased operational costs on businesses, particularly SMEs (Eze & Okoro, 2024).
SMEs in Abuja face rising costs in transportation, energy, and logistics due to fuel subsidy removal, potentially eroding profitability. However, the impact varies across sectors, and some SMEs may adopt innovative strategies to mitigate these effects. Understanding the relationship between fuel subsidy removal and SME profitability is essential for developing targeted support measures.
Statement of the Problem
The removal of fuel subsidies has significantly increased operating costs for SMEs in Abuja, affecting their profitability and growth prospects. Despite its economic significance, there is limited empirical evidence on how SMEs navigate the challenges posed by higher fuel prices (Adebayo & Yusuf, 2023).
This study aims to fill this gap by examining the influence of fuel subsidy removal on SME profitability in Abuja and exploring strategies to enhance resilience in the face of rising costs.
Objectives of the Study
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To analyze the impact of fuel subsidy removal on SME profitability in Abuja.
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To identify coping strategies adopted by SMEs in Abuja to mitigate increased costs.
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To recommend policy measures to support SMEs affected by fuel subsidy removal.
Research Questions
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How does fuel subsidy removal impact SME profitability in Abuja?
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What strategies do SMEs in Abuja adopt to mitigate increased operational costs?
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What policy measures can enhance SME resilience to fuel subsidy removal?
Research Hypotheses
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Fuel subsidy removal does not significantly impact SME profitability in Abuja.
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Coping strategies adopted by SMEs do not significantly mitigate increased costs.
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Policy measures do not significantly enhance SME resilience to fuel subsidy removal.
Scope and Limitations of the Study
This study examines SMEs in Abuja, focusing on the effects of fuel subsidy removal on profitability. Limitations include variations in subsidy removal impacts across different SME sectors and possible reluctance to share financial data.
Definitions of Terms
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Fuel Subsidy Removal: The discontinuation of government financial support to reduce fuel prices.
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Profitability: The financial performance measure indicating the ability to generate profit from business activities.
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SMEs: Small and Medium Enterprises operating in various sectors with limited resources.
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