SMEs in Nigeria are expected to gain several advantages from the unification of exchange rates, including access to cheaper capital, increased foreign direct investment (FDI), and improved access to revenue, according to experts in the finance sector. The exchange rate unification is set to bring about increased transparency and predictability, better planning and risk management, and simplified transactions.
Sola Dada, the managing director of Sovereign Finance Company Limited, highlighted the potential benefits for SMEs during a webinar titled 'Unification of Exchange Rate: Impact on Nigerian Small & Medium Enterprises.' Dada emphasized that SMEs could leverage exchange rate unification to participate in various intervention funds offered by the Central Bank of Nigeria (CBN) and other financial institutions like the Bank of Industry (BOI). By effectively packaging their proposals, SMEs can access these funds and enhance their qualifications for financial support.
Additionally, the unification of exchange rates is expected to enhance the competitiveness of Nigerian businesses and attract more foreign direct investment. The unified exchange rate will lead to increased import costs, which may impact businesses heavily reliant on imported goods and raw materials. However, it can also create export opportunities by making Nigerian products more affordable in international markets.
SMEs stand to benefit from the potential low-interest rate regime resulting from increased liquidity in the system. The availability of more liquidity in the country could pave the way for significant increases in the minimum wage. As a result, there may be an increased demand for locally produced goods, creating opportunities for SMEs to meet this rising demand.
Tunji Esan, the chief commercial officer of Sovereign Finance Company Limited, emphasized that unifying the exchange rate would allow market forces to determine prices, reducing the need for government intervention in the foreign exchange reserve. He believes that the true value of the naira should settle at around N680, suggesting that the current surge in the exchange rate is not sustainable.
Esan further predicted positive outcomes from the exchange rate unification, including increased foreign direct investment, improved access to foreign exchange, higher revenue generation, stimulation of export activities, and the promotion of import substitute goods.
Overall, experts are optimistic that the unification of exchange rates will create a more stable and competitive economic environment, opening doors for SMEs to grow, attract investments, and foster economic growth in Nigeria.
