Financial literacy and sustainability of small and medium enterprises (SMEs) in Nigeria

Abstract

The study is to examine the effect of financial literacy on sustainability of SMEs in Nigeria. The study adopted a survey research design to collect primary data from SME owners across Nigeria. To ensure manageability and representativeness, a sample size of 400 was determined using the Taro Yamane formula. Snowball sampling was employed in recruiting the sample participants. Data were gathered using a structured questionnaire, designed to measure budgeting literacy, financial record-keeping literacy, and financial sustenance through a five-point Likert scale. Data analysis combined descriptive statistics to summarize respondent patterns and multiple regression analysis to assess the effects of the literacy variables on SME financial sustenance at a 5% significance level. The findings revealed that: budgeting literacy has a positive and significant effect on the financial sustenance of SMEs in Nigeria; and that financial record-keeping literacy has a positive and significant effect on the financial sustenance of SMEs in Nigeria. In conclusion, financial literacy functions as a core operational competency, enabling business owners to engage more effectively in financial planning, monitoring, and control, which are activities that are essential for weathering economic shocks, managing limited resources, and ensuring continuity. The study recommended that SMEs owners and operators in Nigeria need to institutionalize budgeting practices within their daily and strategic business operations by developing detailed, realistic budgets and regularly updating them in order to improve their ability to plan, allocate resources efficiently, and anticipate financial challenges.