INSTABILITY AND PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES IN FCT ABUJA.

Abstract

This study investigated the impact of economic instability on the performance of Small and Medium Enterprises (SMEs) in the Federal Capital Territory (FCT), Abuja. It identified key factors contributing to SME instability, including inflationary pressures, fluctuations in high interest rates, and excessive taxation. Adopting a quantitative research methodology, the study utilized a survey research design to gather data. A structured questionnaire was employed as the primary data collection instrument. The study focused on a target population of 2,825 SMEs in FCT Abuja, as reported by SMEDAN (2017). To determine an appropriate sample size, the Taro Yamane formula was applied, yielding a sample of 350 respondents. A simple random sampling technique was used to ensure fair representation in the questionnaire distribution process. The collected data were analyzed using linear regression with the aid of SPSS version 20 to test the study’s hypotheses. Findings from the study revealed a significant and positive relationship between inflation rates and SME performance in FCT Abuja. Similarly, the second hypothesis established that multiple taxation had a significant and positive impact on SME performance. Additionally, the third hypothesis confirmed that high interest rates were positively and significantly associated with SME performance in the region. Based on these findings, the study concludes that economic instability, driven by inflation, fluctuating interest rates, and excessive taxation, plays a crucial role in shaping the profitability, sustainability, and overall growth of SMEs in FCT Abuja. As a result, the study recommends that the government at all levels implement policies aimed at mitigating inflationary pressures. One such measure could be providing subsidized alternative energy sources, such as solar power, to SMEs. Additionally, the government should introduce tax relief measures, such as tax holidays, to ease the financial burden on SMEs. Furthermore, policies should be enacted to lower bank interest rates, thereby improving access to financing for SMEs and enhancing their overall performance.