Effect of External Environment on Performance of Small and Medium Enterprises in Benue State, Nigeria

This study investigated the effect of external environmental factors on the performance of small and medium-sized enterprises (SMEs) in Makurdi, Benue State. Specifically, it examined how economic, infrastructural, and political/regulatory environments influence SME profitability, growth, and productivity. A correlational survey research design was adopted, with a population of 612 SME owners and managers across six key sectors: manufacturing, agro-processing, trading and retailing, hospitality services, transportation and logistics, and information and communication services. Using Taro Yamane’s formula, a sample of 242 respondents was selected, with 212 valid questionnaires retrieved, yielding a response rate of 87.6%. Data were collected using a structured five-point Likert scale questionnaire and analyzed using descriptive statistics and multiple regression analysis. The regression results revealed that the economic environment significantly affects SME performance (β = 0.309, t = 10.556, p = 0.001), the infrastructural environment has the strongest positive effect (β = 0.536, t = 17.346, p < 0.001), and the political/regulatory environment also significantly influences performance (β = 0.094, t = 6.881, p = 0.005). The model explained 66.35% of the variance in SME performance (R² = 0.6635, Adjusted R² = 0.6588), with no indication of autocorrelation (Durbin-Watson = 1.980). The findings suggested that SMEs in Makurdi perform better when economic conditions are stable, infrastructural support is reliable, and regulatory frameworks are clear and predictable. The study concluded that effective management of external environmental factors enhances SME profitability, growth, and productivity. It recommended that SME owners and managers strategically monitor economic trends, optimize infrastructural resources, and engage with regulatory bodies to improve business outcomes.