The recent implementation of the exchange rate unification policy in Nigeria has drawn significant attention from various sectors of the economy.
This time, Sovereign Finance Company Limited has applauded this policy, acknowledging its potential to transform the nation’s economic landscape and empower Small and Medium Enterprises (SMEs).
During a webinar titled “Unification of Exchange Rate: Impact on Nigerian Small & Medium Enterprises,” experts from Sovereign Finance discussed the effects of this policy on businesses and the economy as a whole.
They noted that while the unification presents opportunities for growth and increased transparency, certain challenges must be addressed promptly to ensure its success.
“It is, therefore, unsurprising that despite the potential benefits, reports indicate growing concerns about the policy with Small and Medium-sized Enterprises (SMEs) grappling with the implications of this significant policy change.
“The unification of exchange rates in Nigeria is a significant step towards economic transformation, promising enhanced transparency, predictability, and growth. Sovereign Finance Company Limited, a leading financial services provider, plays a pivotal role in promoting economic resilience and sustainable growth by supporting SMEs and offering financial solutions during this transitional period.
“The government’s capacity to address challenges like leakages, security concerns, and inflationary pressures is imperative for the successful implementation of this policy. With the government’s timely interventions, Nigeria can harness the full potential of exchange rate unification and chart a path toward a prosperous and thriving economy,” experts noted.
On the impact of exchange rate unification on SMEs, Olusola Dada, Managing Director, Sovereign Finance Company Limited, emphasised the positive impact of the exchange rate unification on small and medium-sized enterprises (SMEs). He explained that the policy is expected to enhance transparency, predictability, and risk management in the market. With a unified exchange rate, he noted that SMEs will have improved planning capabilities and simplified transactions, resulting in increased competitiveness and foreign direct investments.
Read also: FTSE downgrade creates negative vibe for Nigeria stocks
Dada stated that the unification of exchange rates is anticipated to benefit the government’s liquidity, leading to a rise in FAAC (Federation Account Allocation Committee) distribution to the states. This injection of funds will likely result in lower interest rates, making it easier for SMEs to access funding for expansion and development.
Olatunji Esan, Chief Commercial Officer at Sovereign Finance said that this policy change is poised to eliminate market distortions, create a level playing field, and instil confidence in Foreign Direct Investors.
According to him, “The exchange rate unification is a groundbreaking move where market forces now determine the exchange rate in Nigeria. This shift marks a significant departure from the previous multiple exchange rate system, promising increased transparency and predictability in the market.”
Challenges and remedies
Despite the promising outlook, certain challenges could hinder the full realisation of the benefits of the exchange rate unification policy. Sovereign Finance Company Limited called on the government to address these issues promptly to ensure a smooth transition and optimal outcomes. These issues include: Tackling Leakages: One of the crucial steps in ensuring the success of exchange rate unification is the government’s ability to promptly address leakages in the system. It is essential to implement stringent measures to curb illicit financial flows, which could undermine the stability of the new unified exchange rate. A major culprit here being the theft of crude oil, which must be eliminated.
Security Challenges: With the prevailing security challenges posing a significant threat to economic activities, the government must prioritize efforts to improve security and create a safe environment for businesses to thrive.
Inflation Control and Food Production: With the potential for increased liquidity in the system, there is a risk of inflationary pressures. To combat this, the government should focus on subsidizing food production and agricultural activities to stabilise food prices and keep inflation in check.
Supporting SMEs through exchange rate unification
In recognition of the significant role that SMEs play in nation-building, Sovereign Finance Company Limited has expressed its unwavering commitment to supporting SMEs during this period of uncertainty.
The company aims to assist SMEs in accessing funding facilities to maximize opportunities that may become available due to improved liquidity. Recognizing that funding is critical for business sustainability and growth, Sovereign Finance will actively guide SMEs in capitalizing on the opportunities arising from the exchange rate unification.
Sovereign Finance, in furtherance of its commitment to promote trailblasing financial and investment solutions to customers in different sectors of the Nigerian economy and create opportunities for wealth accumulation, has called on SMEs across Nigeria to explore their various products and services, including lease financing, investment planning, financial advisory, business & personal loans, as well as trading of foreign & local currencies through its subsidiary, Smart Exchange BDC Limited amongst others.
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
