A financial expert has said that exchange rate unification will lead to access to capital at a cheaper rate for Small and medium-sized enterprises (SMEs).
According to the expert, Sola Dada, managing director of Sovereign Finance Company Limited, the benefit of exchange rate unification on SMEs will increase Foreign Direct Investment(FDI) and access to revenue.
Speaking at a webinar titled ‘Unification of Exchange Rate: Impact on Nigerian Small & Medium Enterprises’, the finance expert said increased transparency and predictability, improved planning and risk management, and simplified transactions are benefits of the unification of exchange rates.
“It depends on the packaging of the goods, how the goods are, the opportunity to participate in several intervention funds by CBN and other finance industries like Bank of Industry (BOI) to package their proposals for institutions to assess qualifications for intervention funds,” he said.
Dada also said the unification of exchange rates’ effect on businesses will enhance competitiveness and increase foreign direct investment.
While speaking about the impact of exchange rate on SMEs businesses, he said it will lead to “increased import costs due to a higher unified rate which can affect businesses reliant on imported goods and raw materials. Also, a more competitive exchange rate can enhance export opportunities by making Nigerian products more affordable in international markets.”
He said there is potential for a low-interest rate regime due to liquidity in the system.”By the availability of more liquidity in the country, the minimum wage should be increased significantly.”
He said the increased demand for locally produced goods arising from possible minimum wage increases will lead to opportunities for SMEs to meet the demand.
Tunji Esan, chief commercial officer of Sovereign Finance Company Limited said the unification of exchange rate will allow market forces to determine the prices.
“Unifying the exchange rate will reduce the reliance on government intervention in the FX reserve and have a more efficient price discovery within the Nigerian market.”
Esan said 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,” Esan said.
