The proposed 2024 Tax reform bill and the Rising Economic Pressures on the Survival of Small and Medium Enterprises (SMEs) in Nigeria: A Need for Legislative intervention
Working Paper
The current proposed 2024 tax bill has planned on raising the Value Added Tax (VAT) from 7.5% to 10% in 2025. This increase is projected to adversely affect the growth and performance of an already weak Small and Medium Enterprises (SMEs). While existing policy reforms in the energy sector and exchange rate has already weaken the productive capacity of the SMEs, raising the VAT could potentially further increase cost of raw material for the SMEs by 33.3%. prices of output will equally be affected by almost the same proportion, thereby weakening both production and sales. Therefore, the likelihood of closure and bankruptcy will rise. SMEs indebted through commercial banks loans will default, the default may likely affect the banking sector as well. This brief calls for legislative intervention to assist in mitigating the impending negative effect of the rising cost of undertaking business in the country by shielding the SMEs from an additional layer policy reform that could be detrimental for their survival. Key Oversight Priorities for Consideration: The National Assembly may consider amending the tax bill by inserting clauses on SMEs tax waivers, tax exemption to low performing SMEs. The National Assemble may wish to carry oversight on Small and Medium Enterprise Development Agency of Nigeria to ensure financial support to underperforming SMEs. Conclusion: Despite the dire economic situation in Nigeria, robust legislative oversight with targeted agency-specific interventions, and active engagement with stakeholders, can provide critical support for SMEs, ensuring that these enterprises continue to play their essential role in promoting stability, security, and prosperity across Nigeria. Without doubt, addressing these issues is essential to alleviate the economic hardships faced by Nigerians, uphold national priorities, and drive sustainable growth in the SME sector