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AN EVALUATION OF GOVERNMENT INCENTIVES SCHEMES TOWARDS SMALL SCALE (CASE STUDY: SOME SELECTED SMALL SCALES FIRMS IN ENUGU METROPOLY)
ABSTRACT
This study conducts a evaluation of government incentive programs targeting small scale enterprises (SSEs), employing selected firms within Enugu Metropolis as a case study. The investigation systematically examines the typology of available incentives, their efficacy in facilitating business growth and sustainability, and the persistent structural challenges hindering their full utilization. Drawing upon a triangulated methodology encompassing critical literature review, empirical survey data, and analytical scrutiny, the research elucidates the pivotal function of government interventions in amplifying SSE contributions to Nigeria’s economic development. Key focus areas include employment generation, innovation stimulation, and regional economic revitalization under existing macroeconomic constraints. Three delineated objectives guide the inquiry: identification of extent government incentive schemes, assessment of their operational impact on SSE performance metrics, and analysis of systemic access barriers. Thematic research questions are formulated to maintain methodological coherence with these objectives. The study’s academic and practical significance lies in generating evidence-based policy recommendations for optimizing incentive architectures to strengthen SSE viability and scalability in Nigeria. The scope is deliberately circumscribed to purposively sampled SSEs operating within Enugu Metropolis, with explicit acknowledgment of methodological limitations including potential data availability constraints, respondent subjectivity, and inherent case study demarcations.
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Small-scale enterprises (SSEs) play a pivotal role in Nigeria’s economic framework, functioning as catalysts for growth by generating employment, reducing poverty, and fostering inclusive development at the grassroots level. In Enugu Metropolis, SSEs operate across diverse sectors, including retail, manufacturing, agro-processing, and services, often facing resource constraints that limit their scalability and competitiveness. Recognizing their potential, the Nigerian government has implemented various incentive schemes such as financial grants, tax exemptions, subsidized loans, and capacity-building initiatives administered through institutions like the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) and the Central Bank of Nigeria (CBN). These programs aim to enhance operational efficiency, improve productivity, and expand market access, thereby contributing to broader economic recovery efforts amid periods of sluggish growth and high unemployment.
The progression of government support for SSEs can be traced from post-independence policies to recent decades, marked by specialized interventions like the National Economic Reconstruction Fund (NERFUND) and the Nigeria Bank for Commerce and Industry (NBCI). In Enugu Metropolis, where SSEs encounter region-specific challenges such as inadequate infrastructure and bureaucratic inefficiencies, these schemes are particularly crucial. Credit access, for instance, has been shown to positively influence business sustainability, enabling firms to invest in inventory, technology, and human capital. Umoh (2025) explores this dynamic in a study focused on Enugu’s frozen fish sector, including firms such as Up Town Frozen Fish & Meat Shop and Lizzy Fish Shop, demonstrating through regression analysis of survey data from 124 respondents that government credit policies significantly impact enterprise performance.
Academic research further underscores the multifaceted advantages of incentive programs. Nwodo et al. (2024) examine how government support drives sales growth in industrial clusters across South-East Nigeria, highlighting improvements in economies of scale and collaborative networks. Similarly, Ogunsanwo and Kazeem (2022) assess the effect of grants on SME expansion in Ogun State, concluding that funding accessibility and adequacy explain approximately 75% of growth disparities findings applicable to Enugu’s context. Additional interventions in Enugu, such as skills training and market linkage initiatives, address critical gaps in expertise and competitiveness.
Despite these efforts, disparities persist in policy implementation. While financial incentives like loans and grants remain prominent, non-financial supports—such as regulatory simplification and infrastructure upgrades lag behind. A recent appraisal in Enugu State emphasizes the need for more efficient funding mechanisms to bolster SME development, noting shortcomings in policy execution that hinder value addition and export potential. Tax incentives have also been scrutinized for their role in stimulating SME investment, with evidence suggesting that tailored, size-based policies can accelerate growth. These measures are especially vital in Nigeria, where high operational costs and urban economic pressures, as seen in Enugu, necessitate innovative support for small businesses that contribute to income generation and social stability.
Nigeria’s broader economic landscape underscores the significance of SSEs. Amidst sluggish growth and labor market challenges, government programs aim to spur entrepreneurship and industrialization. In Enugu Metropolis, selected firms illustrate how incentives yield tangible outcomes, such as job creation and local development. However, effectiveness varies by sector: retail and agro-based enterprises often benefit more from credit access than manufacturing firms hampered by infrastructural deficits like erratic power supply. This study leverages these insights to assess the real-world application of incentive schemes, drawing on empirical case studies to guide future policy formulation.
1.2 Statement of the Problem
Government incentive schemes designed to foster the growth of small-scale enterprises (SSEs) in Nigeria face significant implementation challenges in Enugu Metropolis. While these policies aim to stimulate business development, their effectiveness is undermined by high taxation burdens and cumbersome licensing procedures. Umoh (2025) demonstrates that although credit policies positively influence survival rates in Enugu’s frozen fish sector, tax and licensing policies exhibit negligible impact, thereby exacerbating vulnerabilities and hindering long-term sustainability. This incongruity underscores a critical gap between policy formulation and execution, wherein supportive measures are neutralized by regulatory inefficiencies.
Infrastructural inadequacies further compound these obstacles. Deficiencies in road networks, unreliable power supply, and limited access to modern technology impede the productivity gains expected from incentives in South-East Nigeria’s industrial clusters. Nwodo et al. (2024) highlight the absence of inter-firm collaborations, insufficient investment in advanced technology, and inadequate governmental support as key factors contributing to suboptimal capacity utilization and restricted sales growth. In Enugu, such infrastructural shortcomings escalate operational costs, diminishing the efficacy of incentives for SSEs seeking to compete in national or global markets.
Awareness and accessibility barriers present additional hurdles. Many SSEs in Enugu Metropolis remain uninformed about available support programs or encounter bureaucratic bottlenecks during application processes, resulting in low participation rates. Ogunsanwo and Kazeem (2022) contend that despite the existence of grants, their limited reach and accessibility stifle SME expansion, perpetuating economic stagnation and missed value-addition opportunities. Sector-specific challenges, such as the disproportionate taxation burden on retail enterprises, further emphasize the necessity for customized policy interventions.
The persistence of these issues, despite established policy frameworks, points to systemic deficiencies in design and implementation. For instance, Enugu State’s funding initiatives have been criticized for failing to adequately address crime reduction, per capita income enhancement, or raw material value addition, leading to subpar SME growth outcomes. Similarly, tax policies ostensibly intended to incentivize often impose inequitable burdens on smaller firms, as evidenced by research on Nigerian industrial promoters. This study seeks to address these disparities by analyzing selected firms, elucidating the disconnect between policy objectives and practical outcomes to inform actionable reforms.
1.3 Objectives of the Study
- To identify government incentive schemes available to small scale firms in Enugu Metropolis.
- To assess effectiveness of these schemes on performance of selected small scale firms.
- To examine challenges in accessing these incentive schemes by small scale firms.
1.4 Research Questions
- What government incentive schemes are available to small scale firms in Enugu Metropolis?
- How effective are these schemes on performance of selected small scale firms?
- What challenges exist in accessing these incentive schemes by small scale firms?
1.5 Significance of the Study
This study holds substantial value by furnishing empirical evidence on the efficacy of government incentives for SSEs, enabling policymakers to identify strengths and weaknesses for targeted improvements. For SSE owners in Enugu Metropolis, it offers practical guidance on navigating schemes, optimizing benefits, and overcoming access barriers, potentially leading to enhanced business performance and sustainability. Academically, it enriches the literature on SME development in Nigeria, providing a foundation for comparative studies and theoretical advancements. On a broader scale, refined incentives could catalyze economic growth, increase employment opportunities, reduce poverty levels, and promote equitable regional development in South-East Nigeria. Stakeholders such as financial institutions and development agencies may also leverage the findings to design more inclusive support programs.
1.6 Scope of the Study
The investigation is confined to evaluating government incentive schemes for small scale enterprises, with an emphasis on selected firms operating within Enugu Metropolis. It encompasses key incentives like grants, tax reliefs, credit facilities, and training programs, drawing from primary data via surveys and interviews with firm owners, alongside secondary sources from scholarly publications. The temporal scope aligns with recent policy implementations from 2020 onwards, ensuring relevance to contemporary economic conditions.
1.7 Limitations of the Study
Anticipated constraints include potential biases in self-reported data from respondents, limited generalizability due to the case-study focus on Enugu Metropolis, and challenges in obtaining comprehensive financial records from private firms. External factors such as economic volatility may influence findings. To address these, the study employs methodological triangulation, ethical assurances for confidentiality, and a balanced sample selection.
1.8 Definition of Terms
- Small Scale Enterprises (SSEs): Businesses employing fewer than 50 individuals with total assets (excluding land and buildings) not surpassing N50 million, as per Nigerian SME classifications.
- Government Incentive Schemes: State-provided supports, encompassing financial aids (e.g., grants, loans) and non-financial aids (e.g., tax breaks, training), aimed at stimulating business growth.
- Enugu Metropolis: The core urban zone of Enugu State, Nigeria, including Enugu city and surrounding areas, characterized by diverse commercial activities.
REFERENCES
Aigbedion, I. M., & Anyanwu, S. I. (2020). Appraisal of government funding schemes on the development of small and medium enterprises in Nigeria: A study of Enugu state. International Journal of Small Business and Entrepreneurship Research, 8(2), 1-15. https://doi.org/10.37745/ijsber.2013/vol8n21515
Chime, B. O. (n.d.). An evaluation of government incentives schemes towards small scale (A case study of some selected small scales firms in Enugu metropoly). Naira Project. Retrieved from https://nairaproject.com/m/projects/1815.html
Eze, C. C. (n.d.). The impact of taxation on investment in small and medium-scale enterprises in Nigeria: A case study of Enugu metropolis. TERAS. Retrieved from https://teras.ng/api/asset/document/ff9a1495-6c17-4f07-bf74-bf4f90b2ae30
Nwodo, S. I., Dike, O. N., & Onyeokoro, S. C. (2024). Effects of government incentives on sales growth of selected industrial firms in South-East, Nigeria. International Journal of Business and Management Research. Retrieved from https://eajournals.org/ijbmr/wp-content/uploads/sites/42/2024/07/Effects-of-Government-Incentives-on-Sales-Growth.pdf
Ogunsanwo, A. O., & Kazeem, G. A. (2022). Impact of government grant on growth of small and medium scale enterprises in Nigeria (A study of some selected SMEs owners in Abeokuta, Ogun State). International Journal of Research and Innovation in Social Science, 6(11), 65-71. https://doi.org/10.47772/IJRISS.2022.61104
Umoh, B. E. (2025). The effect of government policies on the survival of small businesses: Evidence from Nigeria. SSRN Electronic Journal. http://dx.doi.org/10.2139/ssrn.5141993