Access to finance has become the mantra of development agencies, policymakers, and financial institutions across Nigeria. Every year, new credit facilities are launched to empower small and medium-sized enterprises (SMEs)—from intervention funds to digital loan apps promising quick access to capital. Yet, despite this enthusiasm, many businesses still struggle to survive. The problem is not always the lack of finance; often, it is the lack of financial literacy to manage it effectively.
Recent global research published by Emerald’s Journal of Financial Reporting and Accounting affirms what many finance professionals already know: financial literacy has a direct and measurable impact on business performance. The study finds that small firms with higher levels of financial literacy make better decisions about investment, credit, and growth, and that access to finance only improves outcomes when business owners know how to use it. In simple terms, money alone does not build sustainable businesses. Knowledge does.
I have seen this firsthand throughout my career in finance. As a financial analyst and later as a CFO, I worked with entrepreneurs and corporate teams that had strong products, motivated staff, and enthusiastic lenders. But when basic literacy gaps existed—such as not understanding cash flow timing, cost structures, or debt ratios—those advantages disappeared quickly. Some firms with access to funding still collapsed within a year because their financial decisions were driven by intuition, not understanding.
Financial literacy goes beyond arithmetic or bookkeeping. It is the ability to interpret numbers, recognize patterns, and use that insight to guide decisions. For SMEs, this means knowing how to read income statements, plan for tax obligations, and understand the difference between profit and liquidity. A business can be profitable on paper yet run out of cash—a lesson many entrepreneurs learn too late.
Nigeria’s SME sector contributes nearly 50 percent of the nation’s GDP and employs over 80 percent of the labor force, according to SMEDAN. Yet, a large percentage of these businesses still operate informally, without structured financial systems or proper record keeping. That informality limits their ability to attract investors, qualify for loans, or scale operations. Even digital banking products, while convenient, cannot replace the judgment that comes from understanding financial data.
The Central Bank of Nigeria’s National Financial Inclusion Strategy has made progress in expanding financial access, but access without literacy is only half a victory. Policymakers must ensure that literacy programs are built into every inclusion initiative. Training modules on budgeting, debt management, and digital finance should accompany every new financial product targeting small businesses. Financial institutions, too, must recognize that an educated client is a sustainable one—loan repayment and performance improve when clients understand how credit works.
Corporate Nigeria can also take the lead. Companies that invest in financial education for staff—from accounting basics to interpreting management reports—gain a stronger internal control culture and better decision-making across departments. Financially literate employees understand how their actions affect costs, cash flow, and profitability. This literacy-driven awareness reduces waste, improves forecasting, and strengthens compliance.
Technology plays a critical role as well, but it must complement, not replace, financial literacy. In my experience, automation and ERP software like Oracle NetSuite or Sage streamline reporting and save time, but the true transformation happens only when the people using those tools understand what the reports mean. Digital systems produce data; literacy turns that data into insight.
In the broader African context, Kenya offers a practical model. Its success with mobile money and digital microfinance platforms came not only from access, but from deliberate efforts to teach users financial management skills. Nigeria’s fintech ecosystem can achieve similar long-term impact by embedding financial literacy into user onboarding, tutorials, and community outreach.
Financial literacy is not an optional skill; it is economic infrastructure. Roads connect people to markets, but literacy connects them to opportunity. For Nigeria’s SMEs, it can be the difference between survival and collapse—between temporary access to funds and lasting inclusion in the financial system. If Nigeria truly wants to unlock the potential of its entrepreneurs, it must move beyond counting how many people have bank accounts and start measuring how well they understand money. Access creates potential; literacy turns that potential into prosperity.
