TAXATION AND SME GROWTH IN NIGERIA: BUILDING RESILIENCE DURING MACROECONOMIC SHOCKS
Naja’atu Bala Rabi’u, PhD
Volume 6 Issue 1
Abstract
Small and Medium Enterprises (SMEs) are widely recognized as the engine of economic growth, employment generation, innovation, and poverty reduction in Nigeria. Despite their strategic importance, the sector continues to experience significant challenges arising from persistent macroeconomic shocks, including rising inflation, exchange rate volatility, high interest rates, energy price increases, and fiscal uncertainties. These shocks have increased operating costs, weakened consumer purchasing power, constrained access to finance, and reduced business competitiveness. Within this context, taxation assumes a dual role. While tax revenue remains indispensable for financing public infrastructure and socioeconomic development, an inefficient tax system characterized by multiple taxation, high compliance costs, and administrative complexities may further constrain SME growth. This paper critically examines the relationship between taxation and SME growth in Nigeria within the broader context of macroeconomic shocks and business resilience. Adopting a qualitative review approach and anchored on the Benefit Theory of Taxation, the paper synthesizes contemporary literature, policy reports, and institutional publications to explore how taxation influences SME performance, innovation, and adaptive capacity. It argues that the impact of taxation on SMEs extends beyond statutory tax rates to include the quality of tax administration, compliance procedures, fiscal policy consistency, and the availability of targeted tax incentives. The paper further demonstrates that resilient SMEs increasingly rely on business model innovation, digital transformation, financial prudence, and operational flexibility to withstand economic disruptions. Consequently, tax policy should complement rather than undermine these adaptive strategies. The paper concludes that creating a predictable, transparent, and innovation-friendly tax environment is essential for enhancing SME resilience and supporting sustainable economic development in Nigeria. It recommends simplified tax administration, harmonization of taxes across government levels, digital tax compliance systems, and targeted fiscal incentives for growth-oriented SMEs. Keywords: Taxation; Small and Medium Enterprises; Business Resilience; Macroeconomic Shocks; Fiscal Policy; Nigeria.
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