The impact of insufficient capital on the income levels of Small-scale enterprises in Yaba Local Government Area, Lagos State, Nigeria

Small-scale enterprises (SSEs) are vital contributors to economic development, accounting for approximately 50% of employment and 35% of Gross Domestic Product (GDP) in Nigeria. These businesses foster entrepreneurship, drive innovation, and provide economic opportunities. However, financial constraints especially insufficient capital pose significant challenges to their growth, sustainability, and profitability. According to previous research, over 60% of SSEs in Nigeria struggle with inadequate funding, leading to high business failure rates within the first five years of operation. This study investigates the impact of insufficient capital on the income levels of SSEs in Yaba Local Government Area, Lagos State, Nigeria. A quantitative research approach was employed, utilizing structured surveys and financial statement analyses from 150 small business owners across retail, manufacturing, and service industries. The study analysed key financial indicators, including net profit margin, revenue growth rate, and return on assets (ROA). The findings reveal a strong negative correlation (R² = 0.68) between insufficient capital and business income levels. Specifically, 56.7% of businesses struggle with access to loans, while 52% experience insufficient internal funding, and 43.3% face high borrowing costs, significantly reducing their profitability. Businesses with better financial access reported a 45% higher net profit margin than those constrained by limited funding. Furthermore, SSEs with high borrowing costs exhibited an average 38% decline in revenue growth compared to well-financed counterparts. The study recommends the following: Policy interventions to lower interest rates and improve financial access for SSEs; Financial literacy programs to equip business owners with effective money management skills; Government-backed credit schemes to provide accessible and flexible funding options; Encouragement of internal savings and reinvestment strategies to improve long-term sustainability. By implementing these measures, stakeholders can enhance the financial sustainability, profitability, and long-term survival of SSEs in Nigeria, ultimately fostering economic growth and employment creation.