Fuel Subsidy Removal and Micro, Small, and Medium Enterprises Performance in Lagos State, Nigeria: An Assessment of Business Protection Measures

Abstract

Fuel subsidy removal has become a major policy challenge with significant implications for micro, small, and medium enterprises (MSMEs), which are highly vulnerable to cost shocks. The 2023 removal of fuel subsidy in Nigeria created a surge in energy and transport costs, affecting MSME productivity and sustainability, especially in Lagos State, the commercial hub. This study therefore assessed the effect of fuel subsidy removal on MSME performance in Lagos State, Nigeria, focusing on business protection measures. The study examined the effect of energy costs, transportation and logistics costs, and government and institutional supports on MSME performance. The study used a descriptive survey research design. Data were collected using a structured questionnaire from 969 MSME owners drawn from a study population of 3,337,552 using Taro Yamane’s formula. Reliability of the instrument was established through pilot testing and Cronbach’s alpha. Data were analysed using multiple regression. Findings revealed that energy costs (β = 0.890), transport and logistics costs (β = 0.839), and government and institutional supports (β = 0.770) significantly affected MSME productivity. The study concluded that subsidy removal negatively affects MSME performance, but government support can reduce the effect. It recommended targeted support in energy alternatives, subsidised logistics, tax reforms, and awareness campaigns. Policy implications include strengthening institutional frameworks to help MSMEs build resilience during economic reforms.