Digitalization of Micro Enterprises and Profitability: Evidence from Nigeria

Abstract

This study investigates the potential positive correlation between profitability and the digitization of business processes in Nigerian micro-enterprises. Based on theory, businesses can achieve their goals of increased profitability, improved performance, growth, and competitive advantage by investing in the appropriate business resources. According to the Resource-based theory (RBT), digitalization is a composite business resource that includes the use of a variety of digital tools accessible for business purposes, such as ordering and purchasing, cash payments and collections, sales, marketing, customer management and meetings, workshops or conferences, and business research. For this study, a structured questionnaire instrument was deployed for primary data gathering across 555 micro-business managers in 36 Nigerian states as well as the Federal Capital Territory (FCT). Descriptive statistics and regression analysis of the data produced results that were consistent with those of multiple earlier studies. Results show that even after controlling for factors that could complicate successful digitalization, the study finds a positive correlation between digitalization and profitability, which is in line with its per-testing predictions. Relying on the findings of the study, it is suggested that Nigerian micro business owners and managers must fully embrace digitalization for improved profitability and overall business performance. For the Nigerian government, it is suggested that digitalization of business operations should be incorporated in any package for entrepreneurship development. The study significantly contributes to literature and enriches users’ understanding of business digitalization and its impact on profitability, especially in the Nigerian context.