This article examines employee engageme nt and f i nanci al pe rf ormance of SMEs in Lagos State, Nigeria. Data was collected through a systematic review of relevant literature and a structured questionnaire. The data obtained from the questionnaire was subjected to descriptive and inferential statistics. The result showed a significant positive relationship between employee engagement and financial performance of SMEs. Employee engagement positively correlated with the financial performance criteria such as profitability, financial strength, operating efficiency, performance stability, level of indebtedness, and ability of the enterprises to raise capital. SMEs can enhance employee engagement through the use of improved employee- management relations, regular training, teamwork, and increase in capacity utilisation rates, among others.