FX disaster, weak naira threatening SMEs’ survival –Economists

Financial specialists have raised the alarm that Nigeria’s foreign exchange insurance policies and the weak naira are endangering the survival of Small and Medium Enterprises, posing a extreme risk to the nation’s financial stability.

In response to them, Nigeria’s international change insurance policies and the fluctuating worth of the naira are putting immense stress on SMEs, notably these depending on imports.

The Central Bank of Nigeria’s unification of the foreign exchange market in 2023, mixed with persistent greenback shortages, have exacerbated the struggles of SMEs, a sector contributing practically 48 per cent of the nation’s Gross Home Product, based on the Small and Medium Enterprises Growth Company of Nigeria.

The naira skilled a pointy drop in opposition to the US greenback within the official market in January 2025. On Friday, January 10, 2025, it closed at N1,544.50/$1 on the Central Bank of Nigeria’s foreign money tracker, marking a slight drop from Thursday’s closing fee of N1,542.00/$1.

Nevertheless, for import-reliant SMEs, the devaluation has led to greater prices for uncooked supplies, equipment, and completed items.

A report by the Lagos Chamber of Commerce and Business indicated that 68 per cent of SMEs skilled revenue margins shrink by over 20 per cent in 2024 because of rising foreign exchange prices.

The Chief Govt Officer of the Centre for the Promotion of Personal Enterprise, Muda Yusuf, mentioned, “SMEs are the spine of Nigeria’s economic system. The federal government should stabilise the foreign exchange market and help SMEs by way of subsidies and reforms.”

“With out swift motion, the foreign exchange disaster might result in mass layoffs, rising poverty, and a setback to Nigeria’s financial diversification objectives, leaving SMEs in survival mode,” he added.

He added that the challenges transcend sourcing foreign exchange, as greater parallel market charges typically compel many SMEs to pay considerably extra to maintain their operations working.

Additionally, the Nationwide Bureau of Statistics reported a 23 per cent improve in the price of imports year-on-year by This fall 2024, additional highlighting the burden on companies.

He additional talked about that producers had been going through rising import prices for uncooked supplies, forcing some SMEs to make use of native alternate options that always fall quick in high quality or provide.

Additionally, the Nationwide President of the Affiliation of Senior Employees of Banks, Insurance coverage, and Monetary Establishments, Olusoji Oluwole, emphasised the necessity for the federal government to prioritise the allocation of funds to companies, particularly with importing.

In response to him, this method would allow the nation to reap financial progress advantages and make companies thrive.

On his half, the Chief Govt Officer of Adoj Restricted and Enterprise Advisor, Mr Abiodun Adetutu, argued that Nigeria’s foreign exchange challenges stem from over-reliance on oil revenues, weak non-oil export efficiency, and coverage inconsistencies.

Adetutu really helpful focused measures, together with elevated foreign exchange provide for SMEs, tax incentives for native manufacturing, and improved entry to credit score services.

Additionally, a Lagos-based electronics importer, Idris Ogundele,  mentioned, “I’ve needed to lower my import orders by half. Even after I safe foreign exchange at extraordinarily excessive charges, my clients can’t afford the worth hikes, and gross sales are declining.”