Small business owners in Nigeria are grappling with the repercussions of exchange rate instability, a concern recently raised by Mr. Segun Kuti-George, the National Vice Chairman of the Nigerian Association of Small-Scale Industrialists. He underscores that the current exchange rate crisis may force businesses to increase prices, potentially leading to economic challenges.
Kuti-George points out that if consumers struggle to meet rising costs of goods and services, it could result in business closures, ultimately impacting the broader economy. He questions why the floating of the Naira has not effectively curbed speculative activities in the foreign exchange market.
The rising cost of production, driven by a reliance on imported inputs like equipment and raw materials, is a significant factor contributing to this challenge. As input costs rise, so does the cost of production, potentially leading to higher product prices.
Kuti-George raises a critical question: Will consumers still be able to afford locally-produced goods? There’s a risk that imported products might become more attractive due to pricing disparities, potentially leading to a preference for imported goods over domestic ones.
To avert further factory closures, Kuti-George urges the government to take swift action in stabilizing the Naira’s value, particularly in the parallel market where many customers access foreign exchange.
In June 2023, the Central Bank of Nigeria (CBN) unified exchange rate windows to maintain Naira stability against foreign currencies, notably the United States Dollar. However, since this initiative, the Naira has faced substantial depreciation, reaching over N1,000 per U.S. dollar in the black market and the Peer-to-Peer (P2P) segments of the forex market. Finding effective strategies to navigate this exchange rate uncertainty is crucial for MSMEs to sustain and thrive in these challenging times.