Why Naira Volatility Challenges SMEs

Why Naira Volatility Challenges SMEs

By [Rembow Daniels Igboke] | October 5, 2025 | 6 min read

The naira’s recent dip to N1,469/$1, coupled with reports of a 30% overvaluation, has Nigerian small and medium enterprises (SMEs) grappling with forex volatility. Inflation and soaring import costs are eroding profit margins, with 17.1% of businesses citing forex challenges as a top concern. 

Central Bank Governor Olayemi Cardoso’s strategy of cutting interest rates aims to spur growth, jobs, and investment, but volatility persists, posing risks for SMEs. Despite these challenges, savvy businesses can turn this forex rollercoaster into an opportunity. Here are five actionable strategies to help Nigerian SMEs thrive in today’s turbulent economy.

Why Naira Volatility Challenges SMEs

Nigeria’s economy, Africa’s largest, faces persistent currency swings driven by global oil price dips and local policy shifts. Central Bank Governor Olayemi Cardoso’s interest rate cuts signal a push for economic growth, but the naira’s volatility continues to drive up costs for imported raw materials and equipment. For SMEs, this translates to tighter margins and fiercer competition. The good news? By adopting smart strategies, you can shield your business and even gain a competitive edge. Let’s explore five tactics to navigate this storm.

1. Source Locally to Reduce Forex Exposure

Why it works: Importing inputs ties your costs to volatile forex rates. Sourcing locally stabilizes expenses and aligns with Nigeria’s economic goals.

How to implement:

• Connect with local suppliers for raw materials. For example, food processing SMEs can source grains or spices from Nigerian farmers.
• Use platforms like Jiji.ng or TradeDepot to find verified local vendors.
• Secure bulk deals with fixed naira pricing to hedge against currency fluctuations.

Pro Tip: Nigeria’s push for OECD seed certification is boosting the reliability of local agricultural inputs, making local sourcing more viable.

Impact: Lagos-based GlowNaija cosmetics cut costs by 25% by switching to locally sourced shea butter, dodging dollar-based import risks.

2. Leverage Fintech for Cost-Effective Transactions

Why it works: Fintech platforms help SMEs manage payments efficiently, reducing forex-related fees in a volatile market.

How to implement:

• Adopt naira-based platforms like Flutterwave or Paystack to minimize conversion costs.
• Explore stablecoin transactions for international deals, aligning with Cardoso’s push for regulated crypto adoption.
• Offer flexible payment plans (e.g., instalments via apps) to attract customers facing inflation pressures.

Pro Tip: Check out Atlas Digital’s new rewards-based banking app for low-fee transactions tailored for SMEs.

Impact: A Port Harcourt retailer boosted sales by 15% after integrating Flutterwave, cutting transaction costs and appealing to budget-conscious buyers.

3. Diversify Revenue to Mitigate Forex Risks

Why it works: Relying on one product or market increases vulnerability to naira swings. Diversifying revenue streams spreads risk and taps new opportunities.

How to implement:

• Export high-demand Nigerian products like garri or crafts to earn foreign currency, offsetting local cost hikes.
• Add complementary products, like a bakery offering packaged snacks to leverage the FMCG sachetization trend.
• Use e-commerce platforms like Jumia or Konga to reach diaspora markets paying in dollars.

Pro Tip: Nigeria’s $1.4bn e-commerce market is set to grow in Q4 2025, offering low-cost diversification channels.

Impact: An Abuja fashion SME doubled revenue by exporting Ankara designs to the UK, using dollar earnings to counter naira volatility.

4. Stabilize Costs with Forward Contracts or Barter

Why it works: Locking in costs or bypassing currency transactions shields SMEs from sudden forex spikes.

How to implement:

• Partner with banks like Zenith or GTBank for forward contracts to fix exchange rates for future imports.
• Use barter systems, trading services (e.g., marketing) for raw materials with other SMEs.
• Negotiate long-term naira-based supplier contracts to avoid price surges.

Pro Tip: Join SMEDAN networks to find barter partners and access financial tools.

Impact: A Kano soap manufacturer saved 20% on raw materials by bartering packaging services, sidestepping forex fluctuations.

5. Build Financial Resilience Through Team Training

Why it works: A financially literate team can spot cost-saving opportunities and adapt to economic shifts, crucial in a volatile market.

How to implement:

• Train staff on forex risk management via free online courses or LSETF workshops.
• Use tools like QuickBooks for data-driven expense tracking and cash flow forecasting.
• Monitor Central Bank policies, like Cardoso’s interest rate cuts, via Nairametrics to stay ahead of market trends.

Pro Tip: Attend the Nigerian Economic Summit (October 6-8, 2025) for insights on leveraging fiscal reforms for SME growth.

Impact: An Enugu tech SME reduced losses by 10% after training its team to track forex trends and optimize pricing.

The Bigger Picture: Seizing Opportunities Amid Volatility

While naira volatility persists, Central Bank Governor Olayemi Cardoso’s interest rate cuts signal a commitment to fostering growth, jobs, and investment. This pro-growth stance, alongside regulated crypto adoption, opens doors for agile SMEs. By sourcing locally, embracing fintech, diversifying revenue, stabilizing costs, and upskilling your team, your business can navigate the forex rollercoaster and emerge stronger.

With Nigeria eyeing a $1tn GDP by 2030 (per the World Bank’s October NDU), SMEs adopting these strategies will lead the charge. Ready to act? Pick one strategy today and share your progress in the comments!

Need a tailored plan for your SME or deeper insights into Cardoso’s policies? Drop a comment or contact us!

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