The purpose of this study was to look into the alleged link between the depreciation of the Naira and the performance of Small and Medium Enterprises. The exporters were the emphasis of the SME group. The purpose of the study was to look into the effects of Naira depreciation on the frequency of imports as well as the impact of Naira depreciation on the operations of small and medium businesses. The survey research design was used in this study. Using judgmental sampling, a total of 100 entrepreneurs in the Lekki area of Lagos state were contacted and their consent to participate in the study was gained. The conclusions of this study, which were based on the chi-square statistical method, demonstrated that the depreciation of the Naira had a detrimental impact on the performance of small and medium businesses. SMEs in Nigeria, in particular, are harmed by the high cost of goods and the discouragement of imports, which has resulted in a scarcity of goods. Furthermore, specific data revealed that clientele for several SMEs has decreased, resulting in high operating costs. Before devaluing the currency, the report advises that the government should first develop self-sufficiency through practical ways. This is due to the fact that a country that cannot generate its own food would inevitably have to rely on other economies for survival.



Background To The Study

Nigeria is considered fortunate because of its abundant natural resources, such as crude oil. Her substantial economic resources have elevated her to a high echelon among the world’s oil producing nations. Her oil and gas business, which has been dubbed “the lifeblood of the country,” has aided her in achieving this enviable position. There are various periodicals dedicated to this topic as well as its role and significance in today’s Nigeria. This has resulted in the division of Nigeria’s four main economic segments: oil-related businesses, the public sector (governments and parastatals – which are still strongly reliant on oil derivatives), the organized private sector, and the informal sector (World Bank 2002). The first sector of the economy is primarily reliant on and concentrated on. The current collapse in oil prices has thrown countries like Nigeria, which has an oil-based economy and an undiversified economy, into economic crisis. The Naira will eventually devalue as a result of the difficulty posed by exchange rate volatility. This has had an impact on the economy’s demand and supply sides. Nigeria’s current government normally relies on foreign exchange reserves generated from crude oil to handle excessive exchange rate volatility, and crude oil prices have recently plummeted. This has a significant impact on foreign exchange earnings. The Central Bank of Nigeria’s (CBN) ability to fund the foreign exchange market has been questioned. The free movement of the currency rate is induced by a low amount of foreign exchange reserve.

Due to factors such as heavy reliance on imported finish products, the industrial sector’s reliance on imported raw materials with other inputs, reversal of capital flow by investors, and high speculative demand, there has been a high demand for foreign exchange in the last five (5) years, causing uncertainty in the foreign exchange market (CBN report, August 2013). As a result, rising foreign exchange demand in the face of erratic supply causes exchange rate volatility.

A significant drop in currency within a fixed exchange rate was formerly referred to as devaluation. Following independence in 1960, agriculture, which had previously been the backbone of the economy, began to deteriorate. This resulted from the finding of crude oil, which has a high value.

When Babangida’s administration introduced the Structural Adjustment Programme in 1986, the currency devaluation became popular in Nigeria. This was done as part of a policy to help the Naira, which was overvalued at the time, achieve a more realistic exchange rate. This constituted an unhealthy threat to Nigeria’s economic growth and development since an overvalued currency exacerbates the country’s balance of payment problems ( Todaro,1989). As a result, the nation was urged to accept the devaluation program as a necessary condition for economic recovery.

Campbell (2004) defines currency devaluation as a planned downward adjustment in a government’s official exchange rate versus a set standard or another currency.

 Statement Of The Problem

Imports will become more expensive as a result of the depreciation of the Naira. Nigeria, as an import-dependent economy, cannot afford to devalue its currency because the country does not produce a product that will attract customers from other countries, and the government has not adequately prepared SMEs to make these products.

Because importing goods and services from China, the United Kingdom, the United States, and other countries is cheaper than producing domestically, the majority of SMEs continue to rely on them. Overdependence on foreign items by SMEs is dangerous, as a reduction in the value of the Naira will result in higher sales expenses and other operational/manufacturing costs. To buy goods and services from other nations, SMEs will have to spend more money.

Objectives Of The Study

The study’s main goal is to look into the impact of the Naira depreciation on small and medium-sized enterprises in Nigeria, utilizing mini importers in Lagos as a case study. The study’s specific goals are as follows:

i. Determine the extent to which SMEs are reliant on imported goods and services.

ii. To investigate the impact of the Naira depreciation on the volume of SMEs’ imports in Nigeria.

iii. To determine the impact of the depreciation of the Naira on the financial performance of Nigerian SMEs.

iii. To assess the effectiveness of the Naira depreciation in promoting the growth of Nigeria’s indigenous small and medium-sized businesses.

Research Questions

The following research questions were established in order to meet the paper’s aims and guide the investigation in the right direction:

i. How reliant on foreign goods and services are Nigerian SMEs?

ii. How has the depreciation of the Naira affected the volume of SMEs’ imports in Nigeria?

iii. How does the depreciation of the Nigerian naira influence the financial performance of SMEs?

iv. Has the depreciation of the Naira been successful in promoting the growth of Nigerian small and medium-sized businesses?

Research Hypotheses

For the investigation, the following hypotheses were developed:

Ho: SMEs rely heavily on imported goods and services.

Hi: The reliance of SMEs on imported goods and services is low.

Ho: There is no link between the depreciation of the Naira and the volume of SMEs’ imports in Nigeria.

Hi: In Nigeria, there is a strong link between the depreciation of the naira and the volume of SMEs’ imports.

Ho: There is no link between the depreciation of the Naira and the financial success of Nigerian SMEs.

Hi: The depreciation of the Nigerian naira has a substantial impact on SMEs’ financial performance.

Ho: The devaluation of the Naira has not been effective in encouraging the growth of indigenous small and medium scale businesses in Nigeria.

Hi: The devaluation of the Naira

Significance Of The Study

The study is noteworthy because it will add to the existing literature on Naira depreciation and how it affects small and medium-sized businesses as well as Nigeria’s economic growth. It will serve as a starting point for future research, academic work, and self-study material for people interested in learning more about the depreciation of the Nigerian currency.

It is also believed that policymakers in Nigeria will find it useful in the creation and implementation of policies on the depreciation of the naira and how it facilitates growth in the country.

Scope And Limitations Of The Study

The study uses responses from selected mini importers of electronic gadgets such as laptops, iPads, phones, televisions, and general wares in Lagos state as a case study to examine the impact of the Naira depreciation on small and medium businesses in Nigeria.

Every scientific project has a limitation. For the purpose of achieving

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