In a recent webinar titled ‘Unification of Exchange Rate: Impact on Nigerian Small & Medium Enterprises,’ Sola Dada, the managing director of Sovereign Finance Company Limited, asserted that exchange rate unification would bring about significant benefits for Small and Medium Enterprises (SMEs). According to Dada, this move would result in increased access to capital at a cheaper rate, potentially transforming the landscape for SMEs in Nigeria.
The finance expert emphasized that SMEs would reap various advantages from exchange rate unification, including enhanced access to revenue and increased Foreign Direct Investment (FDI). He outlined several other benefits, such as increased transparency and predictability, improved planning and risk management, and simplified transactions, all of which would contribute to SMEs’ growth and stability.
During the webinar, Dada emphasized the importance of packaging goods effectively to leverage various intervention funds offered by institutions like the Central Bank of Nigeria (CBN) and the Bank of Industry (BOI). Such funding opportunities can be instrumental in supporting SMEs’ proposals and enhancing their qualifications for intervention funds.
Furthermore, exchange rate unification is expected to positively impact SMEs’ competitiveness and spur foreign direct investment. While it may lead to increased import costs due to a higher unified rate, it can also create export opportunities by making Nigerian products more affordable in international markets.
SMEs may also benefit from a potential low-interest rate regime due to increased liquidity in the system. Dada believes that more liquidity in the country could result in a significant increase in the minimum wage, which, in turn, would boost the demand for locally produced goods. As a result, SMEs could seize opportunities to meet the rising demand for their products.
Tunji Esan, the chief commercial officer of Sovereign Finance Company Limited, added that exchange rate unification would allow market forces to determine prices, reducing the reliance on government intervention in the foreign exchange reserve. This would lead to a more efficient price discovery within the Nigerian market.
He also added that the true value of the naira should settle at N680 and the current rise in the exchange rate is not sustainable.
“We should continue to see inflows from Foreign Direct Investment, more access to FX, increased revenue, stimulation in export activities and we should see the promotion of import substitute goods,” says Esan
In conclusion, the unification of exchange rates presents promising prospects for Nigerian SMEs, paving the way for improved access to capital at more affordable rates and creating a conducive environment for their growth and competitiveness in the global market.
