Effect of Economic Business Environment on the Performance of Small and Medium Enterprises (Smes) in Katsina State, Nigeria
DOI:
https://doi.org/10.56919/jbam.2621.015Keywords:
Economic Business Environment, Exchange Rate, Unemployment Rate, Profitability, SMEs PerformanceAbstract
This study examines the effect of economic business environment on performance of small and medium enterprises in Katsina state. The study investigates the effect of exchange rate and unemployment rate on the profitability performance of small and medium enterprises SMEs. Primary data collected from 500 SMEs owners and managers; the study employs Partial Least Squares Structural Equation Modeling PLS-SEM to examine the relationships between these economic variables and SME performance. The measurement model demonstrates acceptable reliability and validity across all constructs with Cronbach's Alpha values. The structural model results reveal that both exchange rate and unemployment rate have statistically significant negative effects on SMEs profitability performance. The model explains the variance in SMEs performance with both predictors demonstrating small but meaningful effect sizes. These findings underscore the critical importance of macroeconomic stability for SMEs survival and growth in Nigeria's business environment. Based on the study findings, it was concluded that economic business environment negatively affects performance of small and medium enterprises in katsina state. the study further recommends among others that government and other monetary regulatory authorities should device means to improve the exchange rate power of Naira through import dependence reduction, export promotion incentives, exchange rate stabilization policies and foreign currency planning. Government at all level should also introduce policies aimed at facilitating favorable economic conditions directed towards reducing unemployment rate. This can be achieved through labour market stimulation policies, skills development initiatives, SMEs hiring incentives and local demand stimulation.
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