This study examines the role of digital transformation in the performance of Small and Medium-Sized Enterprises (SMEs) in Nigeria. Digital transformation is understood as the process of adopting digital technologies such as cloud computing, artificial intelligence, and big data to restructure business models, improve value creation, and achieve sustainable growth. While digital transformation offers opportunities for innovation, competitiveness, and efficiency, SMEs face challenges related to limited resources, lack of strategic direction, inadequate digital skills, and weak infrastructure. The paper highlights that successful digital transformation requires a balance of three key resources: digital technology, human skills, and strategy. The process is not limited to adopting online tools but extends to broader changes in business models, organizational structures, and market approaches. The study reviews global perspectives, noting that SMEs worldwide struggle with similar obstacles, but emphasizes Nigeria’s unique context, where low adoption rates and limited training continue to hinder progress. The research also draws on stakeholder theory and the resource-based view to explain how digital transformation impacts organizational performance. Performance is assessed using both financial and non-financial measures, including sales growth, innovation, staff talent, and return on equity. Evidence suggests that when properly implemented, digital transformation enhances competitiveness, drives innovation, and creates opportunities for job generation and poverty reduction. In conclusion, the paper argues that for Nigerian SMEs to thrive in the digital era, they must align strategies with technology and human capital while governments and institutions provide supportive infrastructure and policies.