Amenawo I. Offiong

Small and medium enterprises (SMEs) are imperative for the growth of a striving economy because they cater for a huge level of manpower and vast resources. Therefore, it is essential that their stability and performance should be ensured in order to promote the economic growth of Nigeria. SMEs are pronged to unsecured financial risk, which can lead to the collapse of the enterprises. Various studies have been done on the small and medium enterprises’ contribution to the Nigerian economic growth, but only few have addressed how financial risks affect it. This study aims to investigate how financial risk affects SMEs` performance. In other to achieve this exploratory research design was used and data were sourced from Central Bank of Nigeria (CBN) statistical bulletin from 1986 to 2017. The study uses autoregressive distributed lag (ARDL) techniques as the tool of analysis. It reveals a negative and insignificant relationship between financial risk and SMEs` performance in Nigeria in the long run. However, exchange rate risk, liquidity risk, interest rate risk and inflation risk have a significant, but negative impact on small and medium enterprises in the short run, as well as the long run. Financial risk adversely affects the performance of Nigerian SMEs and, therefore, should be controlled to enhance their performance.

Bank capital is one of the protective and necessary parameters for better performance in any banking system. This may explain why the industry in Nigeria has been constantly recapitalized for sectorial enhancement. Given the various bank capital reforms the sectors have undergone and a number of interventions, the question arose: How adequate is capital? The study used descriptive statistics and Levene’s test for equality of variance, as well as an independent sample t-test to look at the (10) ten various performance parameters for both pre- and post- recapitalization periods. From the results of the analysis, most of the performance parameters did not improve after post-recapitalization. This answers the question posed by the study that capital is not adequate in the Nigerian banking sector. Therefore, there is a need to inject more bank capital into the Nigerian banking sector if this sector must have a greater impact and respond to the challenges of the Nigerian economy for sustainable growth and development.