Tax policy on SMEs in Nigeria – How fair?

Small and medium enterprises (SMEs) are the bedrock of the Nigerian economy. They serve as an important source of employment generation, economic dynamism, competition and innovation; thus contributing to national growth and poverty alleviation. In order for SMEs to thrive, there is need to create a favourable business and regulatory environment. Most large companies have their roots in SMEs. In other words, the future large corporations in developing countries like Nigeria, are present day SMEs that need to be nurtured.

The significance of contributions of SMEs to economic growth is seen in more developed climes where their potentials have been successfully harnessed. For instance, SMEs accounted for about 20% of patents (a measure of innovation), in bio-technology-related fields in Europe in 2014. SMEs are also known to account for over 95% of businesses, 60-70% of employment, 55% of gross domestic product (GDP) and generate the lion’s share of new employment.

Also, there are evidences to support the contributions of SMEs to economic development in many developing countries. However, the Nigerian government tends to focus more on larger corporations, with foreign investments, to the detriment of SMEs, whose activities are wrongly perceived to have insignificant impact on the economy. This perception had since been debunked by evidence from antecedents of OECD countries, suggesting that SMEs have a high propensity to transform a country’s economy if a conducive environment is created for them to grow through appropriate regulation and tax policies.

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