Sustainability of SMEs: A Review of the Factors Militating against the Growth of Small and Medium Scale Enterprise in Nigeria

Abstract

This study explores the critical factors influencing the sustainability of Small and Medium-Scale Enterprises (SMEs) in Nigeria, focusing specifically on the interplay between internal management practices and external environmental pressures. Despite their significant role in driving economic development, Nigerian SMEs face a high mortality rate, with many failing to survive beyond their first five years. Employing a mixed-methods approach, the research combines descriptive statistics and linear regression analysis of a sample of 215 SMEs to identify the primary barriers to growth and longevity. The findings reveal a "dual-burden" phenomenon. Externally, an "Energy Tax," characterized by a 74.4% dependency on diesel generators and a restrictive daily power window of just 0–6 hours, severely undermines the competitive advantage of local manufacturers, negatively impacting both price and quality (b = -0.54, p < 0.05$). Internally, the study uncovers a significant positive relationship between Internal Financial Management Practices and firm survival (b = 0.68, p < 0.001$), indicating that financial discipline serves as a crucial buffer against macroeconomic volatility. In conclusion, while the external infrastructural deficit presents a structural ceiling on the scaling of SMEs, internal professionalization emerges as the most reliable predictor of survival. This research contributes to the Resource-Based View (RBV) by illustrating how managerial capabilities can mitigate the challenges posed by "institutional voids." Recommendations include adopting decentralized renewable energy solutions to protect against fuel price volatility, as well as institutionalizing digital financial record-keeping to address the "missing middle" in Nigeria's enterprise landscape.