Economic experts have raised the alarm that Nigeria’s forex policies and the weak naira are endangering the survival of Small and Medium Enterprises, posing a severe threat to the nation’s economic stability.
According to them, Nigeria’s foreign exchange policies and the fluctuating value of the naira are placing immense pressure on SMEs, particularly those dependent on imports.
The Central Bank of Nigeria’s unification of the forex market in 2023, combined with persistent dollar shortages, have exacerbated the struggles of SMEs, a sector contributing nearly 48 per cent of the nation’s Gross Domestic Product, according to the Small and Medium Enterprises Development Agency of Nigeria.
The naira experienced a sharp drop against the US dollar in 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 currency tracker, marking a slight drop from Thursday’s closing rate of N1,542.00/$1.
However, for import-reliant SMEs, the devaluation has led to higher costs for raw materials, machinery, and finished goods.
A report by the Lagos Chamber of Commerce and Industry indicated that 68 per cent of SMEs experienced profit margins shrink by over 20 per cent in 2024 due to rising forex costs.
The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, said, “SMEs are the backbone of Nigeria’s economy. The government must stabilise the forex market and support SMEs through subsidies and reforms.”
“Without swift action, the forex crisis could lead to mass layoffs, rising poverty, and a setback to Nigeria’s economic diversification goals, leaving SMEs in survival mode,” he added.
He added that the challenges go beyond sourcing forex, as higher parallel market rates often compel many SMEs to pay substantially more to keep their operations running.
Also, the National Bureau of Statistics reported a 23 per cent increase in the cost of imports year-on-year by Q4 2024, further highlighting the burden on businesses.
He further mentioned that manufacturers were facing rising import costs for raw materials, forcing some SMEs to use local alternatives that often fall short in quality or supply.
Also, the National President of the Association of Senior Staff of Banks, Insurance, and Financial Institutions, Olusoji Oluwole, emphasised the need for the government to prioritise the allocation of funds to businesses, especially with importing.
According to him, this approach would enable the country to reap economic growth benefits and make businesses thrive.
On his part, the Chief Executive Officer of Adoj Limited and Business Consultant, Mr Abiodun Adetutu, argued that Nigeria’s forex challenges stem from over-reliance on oil revenues, weak non-oil export performance, and policy inconsistencies.
Adetutu recommended targeted measures, including increased forex supply for SMEs, tax incentives for local production, and improved access to credit facilities.
Also, a Lagos-based electronics importer, Idris Ogundele, said, “I have had to cut my import orders by half. Even when I secure forex at extremely high rates, my customers can’t afford the price hikes, and sales are declining.”
