Currency Devaluation and Performance of Small and Medium Enterprises (SMEs) in Nigeria

This study investigates the impact of Naira devaluation on the performance of Small and Medium Enterprises (SMEs) in Nigeria from 1991 to 2023 utilizing the Autoregressive Distributed Lag (ARDL) model. The analysis focuses on the relationship between SME performance and exchange rate as well as on other key macroeconomic. Findings reveal that Naira devaluation has a significant negative short-run effect on SMEs due to increased costs of imported inputs. The long run effect is however found to be positive which indicates that devaluation tends to enhance export competitiveness of SMEs in Nigeria. Moreover, while inflation and money supply negatively impact SME, interest rate has a positive effect. The study therefore underscores the dual nature of devaluation on businesses in Nigeria. While it offers opportunities for export-oriented SMEs, it also poses challenges for businesses reliant on imports. Policy recommendations include subsidies and import restrictions to mitigate adverse effects and promote sustainable SME growth in Nigeria.