Why AI Adoption in Nigerian SMEs Starts with Leadership

Researchers from Babcock University, who analyzed 306 small and medium enterprises across six South-West Nigerian states, found that strategic capabilities—specifically the ability to connect AI to business goals and manage risk—serve as the primary driver for adoption. The study, published in Systems, highlights that technical execution skills are secondary during the initial decision-making phase. Instead, leaders must first demystify the technology by identifying clear use cases, such as inventory control or customer service, before investing in complex software.

Interpersonal leadership also plays a critical role, as the human element determines whether employees embrace or resist change. In smaller firms, where teams operate closely, the ability to build psychological safety and communicate the purpose behind new systems is essential. This creates an organizational climate that supports experimentation, effectively bridging the gap between a leader's interest and actual implementation. For policymakers, the findings suggest that support programs should move beyond providing digital tools and instead invest in leadership development and cultural readiness to ensure that Nigeria’s vast SME sector can remain competitive in a shifting global economy.