Assessment Of Naira Re-Design Policy On The Growth And Survival Of SMEs In Nigeria

Project and Seminar Material for Economics

Assessment Of Naira Re-Design Policy On The Growth And Survival Of SMEs In Nigeria


Abstract


This study focused on the assessment of naira re-design policy on the growth and survival of SMES in Nigeria using Ibile Multipurpose Ventures as case study. The study is was specifically focused on examining the reasons for the naira redesign policy, determining if the naira redesign policy will affect the financial performance of SMEs and investigating if naira redesign policy affect the growth and survival of SMES in Nigeria.

The study adopted the survey research design and randomly enrolled participants in the study. A total of 100 responses were validated from the enrolled participants where all respondent are staff of Ibile Multipurpose Ventures.


Table of Content


  • Title Page
  • Certification
  • Dedication
  • Acknowledgement
  • Table of Content
  • List of Tables
  • Abstract

Chapter One:

Introduction

  • 1.1 Background of the Study
  • 1.2 Statement of the Problem
  • 1.3 Objective of the Study
  • 1.4 Research Questions
  • 1.5 Research Hypothesis
  • 1.6 Significance of the Study
  • 1.7 Scope of the Study
  • 1.8 Limitation of the Study
  • 1.9 Definition of Terms
  • 1.10 Organisations of the Study

Chapter Two:

Review of Literature

  • 2.1 Conceptual Framework
  • 2.2 Theoretical Framework
  • 2.3 Empirical Review

Chapter Three:

Research Methodology

  • 3.1 Research Design
  • 3.2 Population of the Study
  • 3.3 Sample Size Determination
  • 3.4 Sample Size Selection Technique and Procedure
  • 3.5 Research Instrument and Administration
  • 3.6 Method of Data Collection
  • 3.7 Method of Data Analysis
  • 3.8 Validity of the Study
  • 3.9 Reliability of the Study
  • 3.10 Ethical Consideration

Chapter Four:

Data Presentation and Analysis

  • 4.1 Data Presentation
  • 4.2 Analysis of Data
  • 4.3 Answering Research Questions
  • 4.4 Test of Hypotheses

Chapter Five:

Summary, Conclusion and Recommendation

  • 5.1 Summary
  • 5.2 Conclusion
  • 5.3 Recommendation
  • References
  • APPENDIX
  • QUESTIONNAIRE

Chapter One


Introduction

1.1 Background to the Study

The Central Bank of Nigeria (CBN) Governor, Godwin Emefiele, has issued a statement concerning the institution’s policy to introduce redesigned naira notes by the 15th of December 2022.

This, he said, is a result of the continuous rise in the inability of banks to control the circulation of Nigeria’s naira notes, which poses as incompetence on the side of the banking sector as well as a causative factor to why the naira keeps decreasing in value.

Mr Emeliefe mentioned that, amongst the many other reasons behind this new policy, the mass hoarding of banknotes by members of the public and an increasing shortage of banknotes that are standard and clean, which has heightened the ease in the production of counterfeit currencies in the country are notable reasons for this development.

Although this new policy has been revolted by some top personalities in the country, including the Minister of Finance, Budget and National Planning, Zainab Ahmed, saying that she and the ministry were not aware of any plan by the CBN to redesign new banknotes and also complained that it is ill-timed, however, the President has given his support for the plan.

This move by the CBN has been viewed by many to be political, while the institution and others are seeing it from an economic point of view. But the CBN has said that the redesign only applies to denotations like the N200, N500 and N1000 notes. The banknotes (old ones) in circulation now are expected to be submitted to the banks on or before the 31st of January 2023, as after this date, they will be treated as expired currency.

Nigeria’s currency has changed on multiple occasions since 1973. The apex bank is in charge of the issuance and withdrawal of a country’s currency. In 2022, the CBN announced that it had completed plans to redesign the Naira. Olujobi (2022) stated that currency redesigning by the apex body CBN is another method of reducing excess money supply in circulation and reinforcing more monetary policy effectiveness in curbing inflationary pressures, as well as improving the CBN’s exchange rate policy and increasing liquidity.

According to the CBN Governor, money concealment, inflation, and counterfeiting were major reasons for the unusual decision. According to the CBN, approximately N2.73 trillion of the N3.23 trillion in circulation in Nigeria is outside bank vaults. This accounts for approximately 85% of total money in circulation. Furthermore, the Naira is not as secure as it should be because the N200, N500, and N1000 denominations are easier to counterfeit.The exchange of the old currency for the new currency would discourage hoarding by requiring citizens to account for unjustly held funds; otherwise, the hoarder would face financial loss. Similarly, redesigning a country’s national currency allows it to keep counterfeiting to a minimum and stay ahead of counterfeiting threats (Aroghene & Imene, 2023).

Economic development is defined as changes in output distribution, economic and financial structure, and technological progress within a country. Economic development and growth are measured by increase in market value of goods & service(s) produced within a given economy, as well as income per capita GNP. It is traditionally quantified as percentage increased in a given economy’s real gross national product. The industrial segment (mining, forestry, and manufacturing) have a minor impact on economic actions and growth, but the insurance sector, as part of the larger financial sector, aids in risk mitigation in both industrialised and developing economies ( Aroghene, 2022).The commercial activities of small and medium-sized enterprises (SMSEs) have a significant influence on the growth required for a country’s economic development. Thus, the study investigated whether or not the naira redesign objectives had an impact on economic growth by sampling some small and medium-sized enterprises (SMEs) in Delta State, Nigeria.


1.2 Statement of the Problem

On October 26, 2022, the Nigerian central bank announced plans to redesign some denominations of the country’s currencies.The denominations in question are N200.00, N500.00 and N1000.00. The CBN stated that, the new redesign policy aims to reduce counterfeiting, promoting financial inclusion, & implement a cashless policy. The new series were distributed in mid-December, but not all citizens had access to these funds. At the moment, one would expect the economy to be stable, but this is not the case owing to the government’s ineffective monetary and fiscal policies.According to Olujobi (2022), the effectiveness of the government’s monetary and fiscal policies will go a long way toward ensuring that a large number of naira notes circulating outside banks are crammed in. By increasing deposits in commercial banks, banks will have more money to lend, which may result in lower interest rates, capital flight, and more investment opportunities.

Although the policy has encouraged electronic payments and reduced counterfeiting, the policy’s ability to reduce inflation remains in doubt. Given the vulnerability of SMEs, their survival may be jeopardized in an economy characterized by instability, inflation, and fluctuations. According to Aroghene and Imene (2023), apex bank and the government must make a firm commitment to taking the necessary actions in order to ensure that the new currency is viewed as stable by the general public, businesses, and the international community.


1.3 Objective of the Study

The main objective of the study is to assess the naira re-design policy on the growth and survival of SMES in Nigeria.

Specifically, the study aims;

  1. To examine the reasons for the naira redesign policy
  2. To determine if the naira redesign policy will affect the financial performance of SMEs
  3. To investigate if naira redesign policy affect the growth and survival of SMES in Nigeria.

1.4 Research Question

The study will provide answers to the following research questions;

  1. What are the reasons for the naira redesign policy ?
  2. Will the naira redesign policy affect the financial performance of SMEs ?
  3. Does the naira redesign policy affect the growth and survival of SMES in Nigeria ?

1.5 Research hypothesis

  • Ho: There is no significant relationship between naira redesign policy and growth and survival of SMES in Nigeria
  • Hi: There is a significant relationship between naira redesign policy and growth and survival of SMES in Nigeria

1.6 Significance of the Study

The completion of this study on the impact of the Naira redesign on the Nigerian economy will bring several benefits. Firstly, it will provide valuable insights into the effects of currency design on key macroeconomic indicators such as inflation, economic growth, and financial stability.

This information will be crucial for informing future monetary policies in Nigeria and promoting economic stability and growth in the country. Secondly, the study will contribute to the field of monetary economics by providing an empirical evaluation of the impact of currency design on the economy.

This will fill a gap in the current literature and provide a foundation for further research on this topic. Thirdly, the study will inform stakeholders, including policy-makers, business owners, and the general public, about the potential impacts of currency design on the economy. This knowledge can be used to make informed decisions and promote economic development in Nigeria. Lastly, the study will serve as a useful reference for researchers and policymakers in other countries who are interested in the impact of currency design on the economy.


1.7 Scope of the Study

The study will focus on the period before and after the Naira redesign and will analyze the changes in key macroeconomic indicators during that time. The data used in the study will be collected over a sufficient time frame to accurately assess the impact of the Naira redesign on the economy. The study will utilize a combination of primary and secondary data sources. The primary data will be collected through surveys and interviews with relevant stakeholders, such as policy-makers, business owners, and the general public. The secondary data will include published reports, academic journals, and other relevant sources of information.


1.8 Limitation of the Study

In the course of carrying out this study, the researcher experienced some constraints, which included time constraints, financial constraints, language barriers, and the attitude of the respondents. However, the researcher were able to manage these just to ensure the success of this study.


1.9 Operational Definition of Key Terms

Naira Redesign:

The Naira redesign refers to the process of changing the design and appearance of the Nigerian currency.

Macroeconomic Indicators:

Macroeconomic indicators refer to quantifiable measures that reflect the overall state of an economy, such as inflation, economic growth, and financial stability

Inflation:

Inflation refers to the sustained increase in the general price level of goods and services in an economy over a period of time.

Economic Growth:

Economic growth refers to the increase in the production of goods and services in an economy over a period of time.

Financial Stability:

Financial stability refers to the absence of systemic risk in the financial system, which could lead to a financial crisis.

Monetary Policy:

Monetary policy refers to the actions taken by a central bank to influence the supply of money in an economy, with the aim of achieving economic objectives, such as price stability and economic growth.

Fiscal Policy:

Fiscal policy refers to the actions taken by the government to influence the level of government spending and taxation, with the aim of achieving economic objectives, such as economic growth and financial stability.


1.10 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows.

  • Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study.
  • Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.
  • Chapter three deals on the research design and methodology adopted in the study.
  • Chapter four concentrate on the data collection and analysis and presentation of finding.
  • Chapter five gives summary, conclusion, and recommendations made of the study.

Chapter Five


Summary, Conclusions and Recommendations:

5.1 Introduction

This chapter summarizes the findings on the assessment of naira re-design policy on the growth and survival of smes in Nigeria using Ibile Multipurpose Ventures as case study. The chapter consists of summary of the study, conclusions, and recommendations.


5.2 Summary of the Study

In this study, our focus was on the assessment of naira re-design policy on the growth and survival of smes in Nigeria using Ibile Multipurpose Ventures as case study. The study is was specifically focused on examining the reasons for the naira redesign policy, determining if the naira redesign policy will affect the financial performance of SMEs and investigating if naira redesign policy affect the growth and survival of SMES in Nigeria.

The study adopted the survey research design and randomly enrolled participants in the study. A total of 100 responses were validated from the enrolled participants where all respondent are staff of Ibile Multipurpose Ventures.


5.3 Conclusions

With respect to the analysis and the findings of this study, the following conclusions emerged;

The study explored naira redesign objectives and impact on the performance of small and medium scale enterprise SMEs in Delta State. From the tested hypotheses the objective of curbing naira hoarding and restraining counterfeiting had a strong positive significant impact on the performance of SMEs in Delta State while the objective of curtailing inflationary pressure appeared to have weak negative impact on the performance of SMEs in Delta State. Based on the findings the study recommend that government should set up an agency that will assess the working capital requirement of SMEs in Delta State and make such funds available to them so as to facilitate their operations.


5.4 Recommendation

Based on the findings the researcher recommends that;

  1. The government should also ensure harmonization of both monetary and fiscal policies effectiveness so as to create an enabling environment for SMEs.
  2. Accounting bodies should ensure that there is enough publication to enhance public perception of the function to be discharge by the professionals in accounting field.
  3. The regulators of the financial accounting practices should ensure that public organizations adhere strictly to the accounting rules.
  4. An international set of accounting system is recommended for a developing nations like Nigeria to enable her adopt rules and regulations that will enhance her internal accounting system.
  5. Public Sector account system must be securely monitored to ensure that accountancy/accounting system in the public sector is effective and adequate, provide for proper financial control and accountability of stewardship and provide useful information for the effective control and management of government operations.

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