THE IMPACT 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 constitutions set 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.
THE IMPACT OF GOVERNMENT POLICY ON THE GROWTH OF SMALL AND MEDIUM SCALE BUSINESS IN NIGERIA