FINANCIAL RESOURCES ALLOCATION AND OPERATIONAL EFFICIENCY: AN ANALYSIS OF SMES IN NIGERIA

Abstract

This study examines the impact of financial resources allocation on the operational efficiency of Small and Medium Enterprises (SMEs) in Nigeria, with a focus on profitability and productivity. A descriptive survey design was adopted, targeting SMEs across the manufacturing, retail, and service sectors in Aba, Abia State. A sample of 143 respondents was selected using simple random sampling. Data were collected using a validated and reliable instrument titled Financial Resources Allocation and Operational Efficiency in SMEs Questionnaire (FRAOESQ), with a Cronbach Alpha reliability coefficient of 0.93. Data were analyzed using multiple regression analysis at a 0.05 level of significance. Findings revealed a strong positive relationship between financial resource allocation and operational efficiency (R = 0.937, R² = 0.878), indicating that 87.8% of the variation in operational efficiency is explained by budget allocation efficiency, financial resource planning, and capital investment management. Among these, budget allocation efficiency had the highest influence. Descriptive statistics showed that while respondents had neutral to slightly positive perceptions of financial resource allocation, strategic planning and employee development were emphasized more than structured career development. The study concludes that effective financial planning and resource allocation significantly enhance the profitability and productivity of SMEs. It recommends that SMEs should establish clear financial planning strategies that align with their business goals.