Empirical Assessment of Digital Financial Literacy and Liquidity of Small and Medium Enterprises in Nigeria

This study investigates the effect of digital financial literacy (DFL) on the liquidity of Small and Medium Enterprises (SMEs) in Nigeria. Digital financial literacy, encompassing digital payment usage, financial planning, knowledge, behavior and skills, is considered vital in enhancing SMEs’ access to digital financial platforms, cash flow management, and operational sustainability. Despite Nigeria’s digital transformation policies and fintech expansion, many SMEs continue to face liquidity challenges due to limited digital literacy. The study employed an ex post facto research design with quarterly time-series data from 2020 to 2024. Using a Vector Autoregressive (VAR) model and the Toda-Yamamoto causality test, findings revealed that digital payment usage positively and significantly influences SME liquidity. However, other dimensions of DFL financial planning, knowledge, behavior and skills did not exhibit statistically significant long-term or causal relationships with liquidity. The study concludes that while digital engagement is increasing, its translation into liquidity gains remains limited by digital skill gaps, behavioral inertia and contextual constraints such as infrastructure deficits. Recommendations include targeted digital financial education, fintech accessibility reforms, and integration of liquidity-focused modules into digital training programs. The study contributes to literature by introducing a multidimensional DFL construct and offers policy insights into enhancing SME liquidity through digital inclusion. Limitations include the exclusion of informal SMEs and potential underreporting in behavioral constructs.