EFFECT OF WORKING CAPITAL MANAGEMENT ON THE PERFORMANCE OF SMALL AND MEDIUM SCALE ENTERPRISES (SMEs) IN KANO STATE, NIGERIA.

Abstract

Despite the critical role of Small and Medium-scale Enterprises (SMEs) in Nigeria’s economy, their high failure rate has been linked to poor working capital management (WCM), with limited empirical evidence on its impact in Kano State. This study examines the effect of WCM (measured by cash, inventory, receivables, and debt management) on SME performance, addressing gaps in regional research and conflicting findings in existing literature. Using a quantitative cross-sectional design, data were collected via questionnaires from 293 SMEs in Kano State, selected through stratified random sampling, and analysed using regression techniques. Results revealed that cash management (β = 0.201, p < 0.001), inventory management (β = 0.485, p < 0.001), and receivables management (β = 0.218, p < 0.001) significantly enhanced SME performance, while debt management showed no significant effect (β = 0.068, p = 0.092). The study concluded that working capital management has significant effect on the performance of SMEs in Kano state. It was recommended that SMEs managers should develop aggressive policies in debt management so as to lessen the possibility of firm’s failure due to the inadequate debt management strategies