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

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:

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).

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