EFFECT OF EXCHANGE RATE FLUCTUATION ON THE GROWTH OF SMEs PERFORMANCE IN NIGERIA (2013-2024)

Abstract

This study investigated the effect of exchange rate fluctuation on the growth of SMEs performance in Nigeria from 2013 to 2024. The objectives of this study were to investigate the effect of exchange rate volatility on the performance of SMEs, and to examine the effect of interest rate and inflation rate on the performance of SMEs. This study employed ex-post facto research design as the event under study has already taken place. Data for this study were obtained through secondary source. This data included SMEs Industrial Output, Gross Domestic Product, exchange rate, inflation rate and interest rate from 2013-2024 Central Bank Annual Reports and National Bureau of Statistics (NBS) Reports. Data were analyzed using linear regression method and Pearson Product Moment Correlation to test the hypotheses in order to show the relationship between variables. The major findings of this study showed that exchange rate fluctuation has significant effect on SMEs performance (Coefficient of Determination, R², is .689 (68.9%)), as it destabilizes the purchasing power of SMEs which results in decline in SMEs output. Findings also revealed that the relationship between inflation and SMEs performance is significant (R² is (.880), P>.01 (0.000 <.01); the relationship that exists between inflation and SMEs performance is inverse (r =-.14158) relationship. The study concluded that an increase in interest rate causes decline in SMEs output and vice-versa, therefore recommended that policy makers should not totally rely on exchange rate depreciation policy to influence SMEs industrial output but should complement it with other macro-economic policies.