SMEs’ Menace and Energy Deficiency in Lagos, Nigeria: Can Renewable Energy Reduce the drain?

Abstract

The role of small and medium scale enterprises (SMEs) in the growth and development process of any economy can never be overemphasized. This is premised on the ground that, SMEs have recorded an unprecedented success in reducing unemployment, allocating resources efficiently, and making growth inclusive. However, the performances of SMEs tend to be relatively low and insignificant in developing economies like Nigeria owing to several factors inhibiting its growth and effective operation of which energy deficiency is conspicuous. Energy deficiency in Nigeria including the incessant poor quality of electricity supplies, voltage fluctuation, and power outages have pervasively halted production, damaged equipment, and reduced profitability of SMEs. This paper analyses the roles of renewable energy in salvaging the incidence of energy deficiency embattling SMEs in Nigeria with particular reference to the metropolitan areas of Lagos State. A sample of 500 SMEs were selected using systematic sampling approach. Data were collected with a small enterprise structured questionnaire (SESQ) which centered on the effects of power fluctuation, unstable supply and high billing on the operations of SMEs, especially on the operating costs, profitability and its ensuing influence on the firms’ competitiveness. While the data collected was based on discrete analysis, the Logistic Regression was the main analysis. The study finds that renewable energy positively correlates with SMEs performance in terms of Return on Assets (ROA) and Return on Investment (ROI) while energy deficiency negatively affects it. An incentive-based policy on adopting renewable energy is paramount for SMEs to thrive in Nigeria and favorably compete globally.