Abstract

SMEs are central to the Nigerian economy, contributing nearly half of national GDP and over 80% of employment, yet they remain highly vulnerable to external policy shocks. This study examined the economic impact of fuel subsidy removal on small and medium enterprises (SMEs) in Akwa Ibom State, Nigeria, with particular emphasis on operational costs, profitability, and coping strategies. Following the removal of fuel subsidies in 2023, petrol prices rose by over 200%, creating inflationary pressures and escalating the costs of transportation, production, and energy. This study adopted a mixed-methods design, combining a survey of 200 SMEs across agriculture, retail, hospitality, and manufacturing with semi-structured interviews involving 20 SME owners and 10 government officials. Descriptive statistical analysis revealed an average 122% increase in operational costs, with manufacturing firms recording the highest surge (150%). Profitability declined by an average of 64%, with the hospitality sector being the worst affected, recording a 75% reduction. Thematic analysis of the qualitative data highlighted coping mechanisms such as price increases, staff reductions, revenue diversification, and the limited adoption of alternative energy sources. However, these strategies were often insufficient, as declining consumer purchasing power further weakened demand. While government interventions, including renewable energy subsidies and support funds, were introduced, access remained limited, leaving most SMEs without adequate relief. The findings aligned with Keynesian economic theory, which associates contractionary fiscal policies with reduced aggregate demand, and Porter’s theory of competitive advantage, which underscores the need for adaptive strategies. The study recommended targeted SME support, expedited disbursement of funds, low-interest financing for renewable energy, and phased subsidy reforms to minimize economic disruptions.

Keywords: Fuel subsidy, Economic Impact, Profitability, SME support, Renewable Energy, Coping strategies, Akwa Ibom State

https://doi.org/10.5281/zenodo.21214613

Authors:

Ema Iniobong Emmanuel
Faculty of Management Sciences
Department of Business
Administration
National Open University of
Nigeria
Mobile: +2348030970241

Copyright © [2026] The Author(s). Published by the Journal of People and Worldviews (JPW). This is an open access article distributed under the terms of the Creative Commons Attribution 4.0 International (CC BY 4.0) Licence, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author(s) and source are properly credited.