The Effect of The Economic Environment on the Performance of Small-Scale Enterprises in Cross River State, Nigeria

Abstract

Small-scale enterprises constitute an important segment of the Nigerian economy, contributing to employment generation, income creation, poverty reduction, and local economic development. Despite their importance, their performance is increasingly affected by an unstable and challenging economic environment. This study examined the effect of the economic environment on the performance of small-scale enterprises in Cross River State, Nigeria. The study specifically investigated the effects of inflation, access to finance, exchange-rate instability, and electricity and infrastructure conditions on enterprise performance. The study was anchored on the Open Systems Theory, which explains the interaction between organizations and their external environment. A cross-sectional survey design was adopted. A structured questionnaire was administered to a sample of 300 small-scale enterprises. Data were analyzed using descriptive statistics, Cronbach's alpha reliability test, Pearson product-moment correlation, and multiple regression analysis via SPSS. The multiple regression results showed that inflation had a significant negative effect on enterprise performance (B = -0.284, β = -0.291, p < .001), while access to finance had a significant positive effect (B = 0.311, β = 0.356, p < .001). Exchange-rate instability also exerted a significant negative effect (B = -0.219, β = -0.235, p < .001), whereas electricity and infrastructure had a significant positive effect on performance (B = 0.287, β = 0.341, p < .001). The model explained approximately 52.7% of the total variation in enterprise performance (R² = .527, Adjusted R² = .521, F(4, 295) = 78.62, p < .001). The study concludes that the economic environment is a crucial determinant of small-scale enterprise performance in Cross River State. It recommends targeted policy interventions aimed at reducing inflationary pressures, expanding access to flexible and low-interest credit facilities, promoting exchange-rate predictability, and strengthening institutional grid-electricity supply alongside productive regional infrastructure.