Role of Perceived Ease of Doing Business on Profitability of Small Business in Sub-Saharan Africa: An Empirical Investigation

Abstract

Small businesses play a pivotal role in the major portion of the global economy and academic research on it and their profitability has continued to evolve significantly. Yet in Nigeria, these businesses are challenged in many areas such as in market failures, ease of doing business and many other obstacles. This study therefore aims to investigate the effect of ease of doing business (trading across borders, business registrations, taxes, business regulatory environment and electricity availability) on profitability, of selected SMEs in Lagos state, Nigeria the most populous and biggest consumer market in Africa. The research population consisted of registered small companies in Lagos, Nigeria, and the research design was a descriptive survey. Seven hundred and one responses, or 95% of the total, were obtained using a closed-ended questionnaire. The result revealed that there is no significant positive relationship between the ease of doing business and profitability in selected SMEs in Lagos State, Nigeria (R=0.092, R2 = 0.009, t = 1.871, p<0.05). Thus, the null hypothesis was accepted and not rejected, which is a novel finding, considering the difficulty in connection to constant and stable electricity, unfriendly regulatory environment, poor foreign exchange regime and difficulty of trading across the border etc. However, advances in ease of doing business can positively and significantly impact economic expansion and business progress. Therefore, this study recommends the absence of corruption in governance infrastructure which is a robust determinant for creating conducive business atmosphere, and business growth. More so SMEs require government effectiveness and holistic approach in addressing various challenges in the business environment which paradoxically can decrease economic growth in Nigeria.