An exploratory analysis of the impact of financial literacy on the profitability of small-scale businesses in Suburban Lagos, Nigeria

Small-scale businesses are a cornerstone of economic growth, particularly in developing nations like Nigeria, where they drive employment, wealth creation, and poverty reduction. In suburban Lagos, Nigeria, these enterprises play a pivotal role in the local economy, yet they are often constrained by limited access to funding, inadequate market reach, and poor financial management practices. Central to the challenges faced by these businesses is a lack of financial literacy among their owners and managers. Financial literacy encompasses critical skills such as budgeting, saving, investing, and credit management, which are essential for making informed financial decisions that impact business growth and sustainability. This research investigates the relationship between financial literacy and the profitability of small-scale businesses in suburban Lagos, examining how financial literacy influences key business operations, including financial planning, debt management, and investment strategies. The study highlights the unique challenges faced by business operators in these areas and emphasizes the need for targeted financial literacy programs. By using a survey design and focusing on small businesses with annual turnovers under N2,000,000, this study provides a comprehensive view of how financial literacy gaps hinder business performance. The findings will offer valuable insights for policymakers, educators, and financial institutions to develop programs that enhance financial literacy and, in turn, improve the profitability and long-term viability of small-scale businesses in Lagos.