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. 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. However in Nigeria, government has come up with various policies aimed at investing in and boosting the Small and medium scale business 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.
The economic reforms started with the Structural Adjustment Programme (SAP) which was adopted to fill the supply gap in industrial consumer goods created by the difficulties faced by large scale firms which have not easily adapted to the policy changes of SAP (Afolabi, 2013). In view of this and in order to ensure the realization of the potential benefits of virile Small and Medium Enterprises in the economy, a number of economic policies were initiated by the Government and its subsidiary agencies such as the Central Bank of Nigeria (CBN) and the Micro and Medium Enterprises Development Agency of Nigeria (SMEDAN).
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.
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).
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So much happened in Nigeria recently and the Federal Government had to churn out one policy after another to promote local investments, curb inflation, reduce excess liquidity in the system, rejuvenate local production of food, track money laundering and guarantee a better life for the citizens among other potential benefits. Such programmes and policies include;
- YouWIN programme
YouWIN programme was launched in 2012 by former President Goodluck Jonathan, the focus was to create jobs, businesses and build a legacy that will serve the public good. The programme started in 2011 and was meant to find a way of giving the local small and medium scale producers access to the market. This programme is an opportunity for the beneficiaries of the YouWin project to connect not only with their customers, but also with other businesses. Bello 2016 maintains that the programme will promote locally made goods and services. The financial grant for the third edition of the YouWin programme came from the past federal government administration. This shows Federal Government’s commitment to supporting and boosting made-in-Nigeria goods and Small Business Enterprises, not only now but in the future. The Minister of Finance, Mrs. Kemi Adeosun, also then promised to provide support to small scale businesses nationwide and make it the bedrock of Nigeria economic recovery.”
Despite the said commitment of the government, some of the participants expressed disappointment at the organisation of the programme.
The Federal Government introduced a tariff of 70% on used cars and buses effective July 1, 2014. Side by side with that, the government approved import duty waivers on imported Completely Knocked-Down (CKD) components while Semi-Knocked Down (SKD) components will attract only 10% duty without any levy.
The policy was geared at stimulating local manufacturing and assembly of cars, attract investment in the sector, encourage technologically advanced manufacturing activities. So, affordable cars could be produced and this leads to generation of employment.
The policy has its critics as well like those who argue that such a policy being initiated in the midst of an undeveloped steel industry and comatose power was not well thought out. Another criticism is the absence of automotive components supply base and other cluster industries.
- Fiscal Policy Measure On Rice
This new policy was an about-turn by the federal government. In January 2013, the Federal Government announced a rice policy where imported rice attracted a 100 percent levy in addition to 10 percent customs duty. That policy was counterproductive because instead of encouraging local production and discouraging importation, it led to increased smuggling of the product.
With the new policy which took effect from May 26, 2014, the Federal Government approved the reduction of levy on husked brawn and semi-milled or wholly milled rice to 20% for investors with rice-milling capacity. For those who are pure traders and not investors, the government reduced the levy to 60%. The policy, effective May 26, 2014 was geared at encouraging investment in the rice value chain through backward integration.
Following the policy announcement, Africa’s richest man promised to invest $1b in commercial rice farming while Olam Nigeria has also started work on a 420 hectare rice farm and mill in Rukubi, Nassarawa State.
- Import Quota For Fish
Though announced in October 2013, the policy took off on Jan 1, 2014 and was meant to stimulate the country’s self-sufficiency in fish production through a 25% annual fish import cut. The implication is that only 500,000 tons of fish will be allowed to be imported from an annual baseline fish import figure of 700,000 tons originally set for 2014. Fish species farmed in the country such as catfish, tilapia and croaker are now strictly regulated and under prohibition from being imported without control while other fish species are free for entry within the set quota.
The policy was strongly opposed by the Association of Fish Suppliers of Nigeria and even some countries where Nigeria imports from. There were reports at a time of the World Trade Organisation threatening to impose sanctions on Nigeria for “anti-trade” policies. However, the minister of agriculture allayed fears and made clarifications of the policy.
This policy has led to increased local production and reduction in price of fish in the market. According to a report by National Mirror on Dec 22, 2014, Herring prices have come down from N7,600 to N4,000 per carton. In the case of Horse Mackerel, the price came down to N5,800 from more than N9,500 per carton. The Titus species is being sold in the market for N6,800, down from a level of N10,200 per carton.
- Cashless Policy Rollout Across Nigeria
On July 1, 2011 the last phase of the cashless policy was rolled out across the remaining 30 states of Nigeria. Before then Phase 1 had taken off in Lagos on Jan 1, 2012 while Phase 2 which included Abia, Anambra, Kano, Ogun and Rivers States commenced on October 1, 2013. Under this policy, customer’s daily withdrawal or deposits was pegged to a maximum of N150, 000 per individual customer and N1million for corporate clients (now N500,000 for individual and N3, 000, 000 for corporate). With the new policy came the suspension of the 3% surcharge for daily cumulative or single cash withdrawals in excess of N500,000. The policy has led to an increase in the use of alternate channels such as Point of Sale Terminals, ATMs and other electronic means.
- Increase In Tariff on Imported Books
On Feb 28, 2013 the Federal Government issued a circular that imported books would now attract a 65% duty which was later reduced to 50%. The decision was reportedly taken in a bid to protect the nation’s printing industry as publishers would now have to print locally. The policy is in contravention of a 1954 UNESCO treaty on zero tariff on books across member states. Whereas book printers in Nigeria hailed government for the policy, publishers kicked against it.
The policy kick-starts without any notice in March when publishers went to the ports to clear their books and were told to pay the new tariffs. The policy was later put temporarily on hold till 30th September, 2014 to enable those who have placed order for books from abroad before the imposition of the tariff to clear their books.
It is more expensive to print books abroad than in Nigeria presently. It is believed that the Federal Government might grant a one-year waiver on the tariffs to give publishers some time to prepare for the takeoff and printers some time to increase their capacity.
- Devaluation of Naira
The Monetary Policy Committee of the CBN took a decision to devalue the Naira from N155 to N168 against the dollar. The fall in the price of crude oil and our declining reserves necessitated this move. The CBN hopes to tighten the monetary policy framework by allowing some flexibility in the exchange rate, as well as stem speculative activities and depletion of foreign reserves which, as at October, had fallen to N37.1 trillion. As at December 29th, 2014; 1 US Dollar was exchanging far above the official rate at N185.05. This drastically affected the small business enterprises.
- Increase in Cash Reserve Ratio of Banks
Earlier in the year, the cash reserve ratio on public sector deposits in banks was increased from 50% to 75%. The ratio had been increased from 12% to 50% only last year. The cash reserve ratio, which is the required cash banks are expected to keep with the apex bank, had an immediate impact on the banks as the amount available for daily transactions reduced. The cash reserve ratio on private sector deposits has now been increased to 20% from 15%. This indirectly increases the interest rate of commercial bank and this in turn deterred small business start-up.
9. National Industrial Revolution Plan (NIRP) and the National Enterprise Development Programme (NEDEP)
Both were launched on the same day in February.
The president said that the National Industrial Revolution Plan (NIRP) is “the most ambitious industrialisation programme ever pursued by our nation” and will “accelerate growth in those industries where Nigeria has comparative advantages such as food and agric products, metals and solid minerals processing, oil and gas related industries, construction, light manufacturing and services.” The National Industrial Revolution Plan targets N5 trillion revenue for Nigerians manufacturers annually. An 8-man committee with the richest man in Africa as alternate co-chair was set up by the President on National Industrial Revolution Plan.
National Enterprise Development Programme (NEDEP), on the other hand was initiated to tap into the potentials of micro, small and medium enterprises as “the bedrock for industrialisation and inclusive economic growth.” Pres. Jonathan said that under NEDEP, “enterprise zones will be created in every state of the federation equipped with essential infrastructure for small businesses to thrive and transform Nigeria through employment generation, economic linkages and rural industrialisation.” The impact of these two initiatives so far is still unclear.
Afolabi, Michael Oluseye (2013). Growth effect of Small and Medium Enterprises (SMEs) Financing in Nigeria; Journal of African Macroeconomic Review Vol. 3, No.1
Izedomi, A. (2011). Principles of Management, Nigeria: Benin, Alfred-Joe Publishers, pp. 73-78
Yemin, Bello. “Boosting the Economy through YouWin Made-in-Nigeria Project”, Thisdaylive. September 4, 2017