EFFECT OF FUEL SUBSIDY REMOVAL ON THE OPERATIONS OF SELECTED SMALL AND MEDIUM SCALE ENTERPRISES IN FCT ABUJA

Abstract

This study examined effect of Fuel subsidy removal on the operations of selected Small and Medium Scale Enterprises (SMEs) in FCT Abuja. In this research, the independent variable (IV) examined was the removal of subsidies, which was used to assess the dependent variable (DV) related to the operations of SMEs, including operational efficiency, financial performance, and competitiveness. The study employed a mixed-method approach, utilizing both quantitative and qualitative research through a survey design; data were gathered using questionnaires and interviews. The study population comprised 398 SMEs trained by SMEDAN in 2022 within the FCT, which was treated as the sample size given its manageable nature. The Ordinary Least Squares (OLS) linear regression method was utilized to test the hypotheses. The results indicated that the removal of fuel subsidies has a notable impact on the operational efficiency of SMEs in FCT Abuja. The second hypothesis further suggested that the removal of fuel subsidies significantly affects the financial performance of SMEs in FCT Abuja. Lastly, the findings indicated that the removal of fuel subsidies significantly influences the competitiveness of SMEs. This research concludes that the removal of fuel subsidies significantly influences the operational efficiency, financial performance, and competitiveness of SMEs in FCT Abuja. The study suggests that SMEs should receive incentives for fuel efficiency to facilitate the adoption of fuel-efficient technologies or practices, thus alleviating the effects of higher fuel costs on operational expenditures. Additionally, it is recommended that SMEs in FCT Abuja be encouraged to investigate alternative energy sources, such as solar and gas, to improve financial performance. The government should formulate SME development policies, including tax reductions and a fuel price stabilization fund, to foster the growth and development of SMEs for enhanced competitiveness.