Digital Capabilities and SME Performance in Northern Nigeria: The Moderating Role of Access to Finance

The research looks at the impact of the digital capabilities, specifically the use of digital platforms and the literacy of ICT, on the performance of SMEs in Northern Nigeria, as well as whether finance access serves as a moderator. Based on Resource-Based View and Contingency Theory, the study examines the case of digital transformation benefits being conditional for the resource-poor enterprises. A cross-sectional survey of 512 SME owners and managers from three states, Kano, Katsina, and Kaduna, was then analysed using the PLS SEM approach. The measurement model was found to have excellent reliability (Cronbach's α: 0.926–0.958) and validity (AVE: 0.819–0.857) through the different models. The findings indicate that the usage of digital platforms and ICT literacy facilitate the improvement of SME performance. Moreover, access to finance acts as a significant moderate factor in both relationships. Simple slope analysis indicates that the performance differentials are very large: for high digital capacity, well-capitalized SMEs get performance scores of 0.70–0.79 whereas, on the contrary, financially constrained companies have scores ranging from -0.32 to -0.21 which is a difference of more than 1.0 standard deviation. The results reveal that digital transformation should go hand in hand with synchronized digital-financial interventions. Digital-only or finance-only policies will not suffice since the best performance gains will only be realized when the digital skills are complemented by financial access simultaneity. Policymakers are advised to merge the SMEDAN training programs with the CBN financial inclusivity schemes.