WORKING CAPITAL MANAGEMENT AND SMEs PROFITABILITY IN NORTH-EASTERN NIGERIA: EMPIRICAL EVIDENCE FROM A POST-CONFLICT ECONOMY

Abstract

Abstract

This study examines the impact of working capital management (WCM) practices on the profitability of small and medium enterprises (SMEs) operating in North-Eastern Nigeria, a region severely affected by the Boko Haram insurgency. The research addresses a critical gap in understanding how WCM components accounts receivable, inventory ratio, accounts payable, and cash conversion cycle influence SME profitability in a fragile, post-conflict economic environment. Shehu Adamu Jumba. A cross-sectional survey design was employed. Data were collected from 51 SME managers and accountants operating under the Technology Incubation Centre (TIC) in North-Eastern Nigeria. The questionnaire, adapted from Afrifa (2013), measured four WCM components and profitability on 5-point Likert scales. Descriptive statistics, Pearson correlation, and multiple regression analysis were conducted using SPSS Version 22. Robustness checks included multicollinearity (VIF) and autocorrelation (Durbin-Watson) tests. The results reveal that accounts payable (β = 0.425, p < 0.01) and cash conversion cycle (β = 0.456, p < 0.001) have significant positive effects on SME profitability. Accounts receivable and inventory ratio, while positively correlated, were not statistically significant predictors in the full model. The overall model explains 64.7% of the variance in SME profitability (adjusted R² = 0.647, F(4,46) = 23.889, p < 0.001). SME managers in conflict-affected regions should prioritize managing payment terms with suppliers (accounts payable) and reducing the cash conversion cycle rather than focusing exclusively on receivables collection. Policymakers (SMEDAN, Bank of Industry) should design working capital facilities that accommodate longer payable periods typical of post-conflict supply chains. This is one of the first empirical studies to focus exclusively on WCM-profitability nexus for SMEs in North-Eastern Nigeria, providing context-specific evidence from a region devastated by over a decade of insurgency. The findings challenge conventional WCM wisdom developed in stable economies.