Currency devaluation is a macro-economic, fiscal policy which dwells on deliberate reduction in the value of local currency with the purpose of increasing gain in tradable items Cost of Goods and services are cheaper in a nation where currency is devalued compared to another where there is no currency devaluation.

1. EFFECT OF THE NAIRA DEVALUATION ON
MICRO, SMALL AND MEDIUM
ENTERPRISES (MSMEs) IN OWERRI
METROPOLIS, IMO STATE
BY
ALOZIE, S. T.,
NWAIWU,B. N.
NJOKU, U. AND
IWUEKE, O.C. Ph.D

2. Introduction
• Currency devaluation is a macro-economic,
fiscal policy which dwells on deliberate
reduction in the value of local currency with
the purpose of increasing gain in tradable
items
• Cost of Goods and services are cheaper in a
nation where currency is devalued compared
to another where there is no currency
devaluation.

3. Introduction contd.
• Reduction in prices of goods or services can
help stimulate trading activities in a country
with overall purpose of enhancing economic
growth and development to help alleviate
poverty.
• This challenge brought about by exchange rate
fluctuations is eventually leading to the
devaluation of the Naira due to the sharp drop
in the price of crude oil which is the major
revenue earner of the government.

4. Introduction contd.
• The government of the day in Nigeria usually
relies on foreign exchange reserve generated
from crude oil to manage excessive volatility
in exchange rate and recently crude oil prices
have dropped drastically.
• The capacity of the Central Bank of Nigeria
(CBN) to fund foreign exchange market has
being called to question.

5. Statement of Problem
• An import dependent, mono product
economy like ours cannot afford to devalue
her currency because she is not producing
goods that would attract buyers from abroad
and MSMEs are not well equipped by the
government to produce these products.
• The overdependence of MSMEs on foreign
products (inputs) is suicidal as a drop in the
value of naira will result to higher cost of
sales, and other operational/manufacturing
costs.

6. Objectives of the study
• To assess the dependency level of MSMEs on
foreign goods and services.
• To determine the effect of the naira
devaluation on financial performance of
MSMEs in Nigeria.
• To examine the effect of the naira devaluation
on import volume of MSMEs in Nigeria.

7. Research Questions
• How dependent are MSMEs in Nigeria on
Foreign goods and services?
• How does devaluation of the naira affect
financial performance of MSMEs in Nigeria?
• What effects does the naira devaluation have
on import volume of MSMEs in Nigeria?

8. Hypothesis
• Ho: MSMEs dependence on foreign goods and
services is high.
• Ho: There is no significant relationship
between the naira devaluation and financial
performance of MSMEs in Nigeria.
• Ho: There is no significant relationship
between the naira devaluation and import
volume of MSMEs in Nigeria.

9. Theoretical & Empirical Literature
• Dependency Theory aptly captured this study
which means an economic system where one
country relies upon another for the purpose of
its economic growth and development. The
underlining tune in this dependency theory is
economic relationship.
• The dependant nations as referred to in this
theory are the peripheries or less developed
nations (LDCs).

10. Literature contd.
• The theory holds that the economic policies
that regulate the economic activities of the
less developed nations are externally
formulated and dictated by the developed
countries (DCs). In this case, the policies flow
from the developed countries to the less
developed ones, thereby creating room for
slope sidedness.
•

11. Literature contd.
• This is a situation that represents master- servant
relationship between the developed and less
developed nations since the less developed
nations are fenced out in the making of the
existing global economic policies.
• Abayomi (2007), in assessing the impact of
devaluation of naira, opines that Nigeria as a
dependent economy, devaluation can only make
goods and service expensive. In addition to the
falling naira exchange rate according to Adebayo,
is the crippling effect of inflation in Nigeria
(Adebayo 2009).

12. Methodology, analysis and findings
• The study is a descriptive one conducted through
personally administered questionnaire. The population
of the study covered the entire Owerri Metropolis in
Imo state. Stratified random sampling method was
used to select (200) respondents. Chi-square was used
to analyse the data at 0.05 (5%) level of significance.
Questions 8, 9 and 10 were used to test the three
hypotheses with the following results hypothesis one
X2C = 246.1, X2T at 0.05 with df = 4 is 9.49, hypothesis
two X2C = 257.710, X2T at 0.05 with df = 4 is 9.49 and
hypothesis three X2C = 246.1, X2T at 0.05 with df = 4 is
9.49 All the three alternative hypotheses were
accepted and the null rejected because the calculated
values were greater than the critical values.

13. Conclusion
• Devaluation of the naira affects micro, small
and medium enterprises (MSMEs) in Nigeria in
a negative way due to over dependence of
MSMEs on imports and over dependence of
the government on oil revenue. This ripple
effect has brought about losses to many
business owners and hardship to many
citizens who bear the high cost in the market.

14. Recommendation.
• The study among others recommend that
government should take diversification of the
economy seriously. Policies should be
designed and implemented to fast track the
diversification of the Nigerian economy. Oil
prices should not be allowed to be the prime
determinant of the value of the naira. Other
areas such as agriculture, tourism, education
should be explored to attract more foreign
exchanges and revenue.

15. Thank You for Listening