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THE IMAPCT
OF GOVERNMENT POLICY ON THE GROWTH OF SMALL AND MEDIUM SCALE BUSINESS IN
NIGERIA
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Policy is
defined in the Merriam-Webster Online Dictionary as a definite course or method
of action selected from among alternatives to guide and determine present and
future decisions. Policy can also be defined as making decisions that reflect
values and allocating resources based on those values. Thus, policy represents
a particular political, ethical, or programmatic viewpoint. Governmental policy
reflects theoretical or experiential assumptions about what is required to
resolve a particular issue or problem (Obi, 2001). At the federal and state
levels, governmental policy is reflected in multiple venues:
The federal
and state constitutionsset the general framework, as interpreted in specific
instances through court decisions.
The chief
executive’s agendais presented through speeches, press releases, “State of the
State” and budget messages to the legislature, executive orders, and
instructions to department heads.
Legislative
policyis expressed in speeches and press releases by the leadership and formulated
in policy and appropriation bills.
It is not
generally recognized that budgets, expressed in appropriation acts and taxes,
are critical statements of social policy. Budgets distribute resources and
determine what government can and cannot do. They may or may not provide stable
resources for governmental services (Bacdon, 2004).
Policy can
also be found in the determinations and decisions of state department heads and
middle management. Their decisions or actions determine how legislative policy
and broad governmental mandates are actually translated into services. Policy
is reflected in strategic plans and policy memoranda (EKSG, 2014).
It is
translated and carried out through rules and regulations, manuals, requests for
proposals, contractual agreements, enforcement actions, and so forth. However,
many researchers has proved in the past that government policies do influences
small and medium scale enterprises. Small and medium enterprises are believed
to be the engine room for the development of any economy, because they form the
bulk of business activities in a growing economy like that of Nigeria (Basil,
2005). This is manifested in the following ways, Employment generation, rural
development, Economic growth and Industrialization, Better Utilization of
Indigenous Resources.
Governments
create the rules and frameworks in which Small and medium scale enterprises are
able to compete against each other. From time to time the government will
change these rules and frameworks forcing small and medium scale enterprises to
change the way they operate (Essien & Udofia, 2006). Small and medium scale
enterprises are thus keenly affected by government policy. Key area of
government policy that affects business is taxation policy. Taxation policy
affects business costs. For example, a rise in corporation tax (on business
profits) has the same effect as an increase in costs. Small and medium scale
enterprises can pass some of this tax on to consumers in higher prices, but it
will also affect the bottom line. Other business taxes are environmental taxes
(e.g. landfill tax), and VAT (value added tax). VAT is actually passed down the
line to the final consumer but the administration of the VAT system is a cost
for business (Ikherehon, 2002). Moreover, the government of the day regularly
changes laws in line with its political policies. As a result small and medium
scale enterprises continually have to respond to changes in the legal framework
(Izedomi, 2011). However, the researcher will in this chapter provide an introduction
on the impact of various government policies on Small and medium scale
enterprises
1.2 STATEMENT OF THE PROBLEM
The term
government policy can be used to describe any course of action which intends to
change a certain situation. Think of policies as a starting point for
government to take a course of action that makes a real life change (Ekezie,
1995). Government uses policy to tackle a wide range of issues. In fact, it can
make policies that could change how much tax you pay, parking fines, import and
export duties, immigration laws and pensions (Ireghan, 2009). However in
Nigeria, government has come up with various policies aimed at investing in and
boosting the Small and medium scale enterprises to generate employment and
reduction of poverty but there has been issues of poor implementation. Policies
can also be changed by government when is not effective, also when they create
a policy it can be made to affect specific groups of people or everyone in
society. Other government policies concerning issues such as subsidies,
interest rates, exchange rates and public-private partnerships also influence
the growth of small and medium scale enterprises (Iromaka, 2006). However, the
researcher is seeking to examine the impact of government policies on the
growth of small and medium scale enterprises in Nigeria.
1.3 OBJECTIVES OF THE STUDY
The general
objective of this study is to examine the impact of government policy on the
growth of small and medium scale enterprise while the following are the specific
objectives
To ascertain
the impact of government policy on the growth of small and medium scale
enterprise.
To determine
the nature of government policy that can influence the growth of small and
medium scale enterprise.
To identify
factors limiting the growth of small and medium scale enterprise.
1.4 RESEARCH QUESTIONS
What is the
impact of government policy on the growth of small and medium scale enterprise?
What kind of
government policy can influence the growth of small and medium scale enterprise?
What are the
factors limiting the growth of small and medium scale enterprise?
1.5 HYPOTHESIS
HO:
Government policy does not affect the growth of small and medium scale
enterprise
HA:
Government policy does affect the growth of small and medium scale enterprise
1.6 SIGNIFICANCE OF THE STUDY
This study
on the impact of government policy on the growth of small and medium scale
enterprises will enlighten the entrepreneurs and the general public on how
government policy can positively or negatively affect the growth of small and
medium, scale enterprises. It will as well be a useful guide for the government
in formulating policies that will contribute to the nation’s GDP through the
growth of small and medium scale enterprises. This research will also serve as
a resource base to other scholars and researchers interested in carrying out
further research in this field subsequently, if applied will go to an extent to
provide new explanation to the topic.
1.7 SCOPE/LIMITATIONS OF THE STUDY
This
research will cover the overview of the different government policies and how
they can influence the growth of small and medium scale enterprises. It will
also covers investigations into different kinds of government policies and how
they affect the growth of small and medium scale business. Factors that
generally affect the growth of small and medium scale enterprises will also be
considered in this research.
1.8 DEFINITION OF TERMS
Government
policy: A plan or course of action, as of a government, political party, or
business, intended to influence and determine decisions, actions, and other
matters
SMEs: an
enterprise that has asset base (excluding land) of between N5million –N500
million and labour force of between 11 and 300.
Tax: a
compulsory contribution to state revenue, levied by the government on workers'
income and business profits, or added to the cost of some goods, services, and
transactions
Subsidies: a
sum of money granted by the state or a public body to help an industry or
business keep the price of a commodity or service low.
Economy: the
state of a country or region in terms of the production and consumption of
goods and services and the supply of money.
REFERENCES
Anyanwu, A.
(2001). Small and Medium Enterprises (SMES) In Nigeria: Problems and Prospects,
Ph.D. Thesis, St. Clements University, pp. 79-82.
Bacdon, C.T.
(2004). Small Scale Industries and Economic Development in Ghana: Business and
Strategies in informal sector Economics, VerlagBreitenbech, Saarbruckh,
Germany, pp. 19-23.
Basil,
A.N.O. (2005) Small and Medium Enterprises (SMES) In Nigeria: Problems and
Prospects, Ph.D. Thesis, St. Clements University, pp. 46-59.
Ekezie, C.
(1995). Breakdown of Business Ventures in Nigeria, in Gladwin, A. (2000) (ed.)
Entrepreneurship: a conceptual approach. Lagos: Concept Publishers Limited, p.
69
Essien, P.
and Udofia, A. (2006). Evolving a National Framework for the Emergence of a
Strong and Virile Small and Medium Scale Industry Sub-Sector in Nigeria. A
Seminar Paper Presented at MAN House, November 5th, p3.
Government
of Ekiti State (2014). Internal Economic Policy: A reliable tool for Rapid
Development. Retrieved from http:// ekiti state.gov.ng
Ikherehon,
I.G.(2002).The Practice business guide for the entrepreneur in Africa. Lagos:
Pathead Enterprises, p. 88.
Ireghan, C.
(2009). Small Scale Business Development in Nigeria., in Ireghan, C. (ed.) The
Place of Small and Medium Scale Business in the development of a nation State.
Nigeria: Lagos, Kaycee Publishers, pp. 79.
Iromaka, C.
(2006). Entrepreneurship in small business firms. Ikeja: G-Mag. Investments
Ltd, (Educational Publishers), pp. 49-56.
Izedomi, A.
(2011). Principles of Management, Nigeria: Benin, Alfred-Joe Publishers, pp.
73-78
Obi, P.
(2001). Ensuring the Socio-Economic Growth of a Nation. A Paper Presented at a
Conference in Johannesburg, between 12th and 15th December, p. 8.
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