Naira Devaluation and its effects on the Performance of Small and Medium Enterprises in Awka-South, Anambra State, Nigeria

Abstract

The recurring devaluation of the Nigerian Naira has raised concerns about its implications for various sectors of the economy. The study examines the root cause of Naira devaluation and its effect on the performance of small and medium enterprises in Awka-South, Anambra State and possible solutions to leverage on to promote overall economic growth in Nigeria. The study was anchored on J-curve theory. Secondary sources of data via the internet, newspapers, newsletters, libraries and other documented materials pertinent to the study were used. The findings indicated that there is a positive relationship between naira devaluation and performance of SMEs in Awka-South, Anambra State, Nigeria. The study therefore concludes that naira devaluation has significant effects on various aspects of the economy, including the volume of imports, financial performance, and development of indigenous entrepreneurial businesses. A devalued naira typically leads to an increase in the cost of imported goods, which in turn can reduce the volume of imports. However, this can also lead to inflation, making it difficult for businesses to operate and for consumers to afford essential goods. The study recommends that the Nigerian government should focus on policies and initiatives that promote overall economic growth. This can be achieved by implementing measures to improve infrastructure, streamline regulatory frameworks, and provide access to finance and technology. This will help to mitigate the impact of naira devaluation on the country's economy. SMEs should also diversify their export destinations to reduce reliance on a single market. This will help them capitalize on favorable exchange rates in different countries and mitigate the impact of currency fluctuations.