FUEL SUBSIDY REMOVAL AND SME’S PERFORMANCE IN EDO STATE, NIGERIA

Abstract

This study investigates the relationship between fuel subsidy removal and the performance of Small and Medium Enterprises (SMEs) in Edo State, Nigeria, with specific objectives centered on assessing how increased fuel production costs impact operational efficiency, how supply chain costs influence profitability, and how financing costs affect SME growth rates. Adopting a survey research design, the study focused on 929 registered SMEs, selecting a sample of 164 through stratified random sampling to ensure representation across different sectors. Data collected were analyzed using multiple regression analysis, finding from the study revealed that; rising production costs due to fuel subsidy removal diminished operational efficiency by increasing overhead expenses, inflated supply chain costs reduced profit margins due to higher transportation and logistics expenses, and increased financing costs, driven by higher fuel-dependent operational loans, stifled business expansion and growth. The study concludes that the removal of fuel subsidies has exacerbated financial pressures on SMEs, constraining their productivity and sustainability. To alleviate these challenges, the study recommends proactive government interventions, including targeted financial aid such as low-interest loans or grants, the promotion of subsidized renewable energy alternatives to reduce dependency on fuel, and the implementation of price stabilization policies to cushion SMEs from volatile fuel prices. These measures would help sustain SME operations, foster profitability, and stimulate economic growth in Benin-City and Edo State at large.