Review of the Naira Redesign and Its Effect on Micro, Small, and Medium Enterprises (MSMEs)

Abstract

Micro, Small, and Medium Enterprises contribute 48% of Nigeria's GDP and account for 96% of businesses and 84% of employment. Despite their significant economic impact, MSMEs face challenges that make growing and scaling their businesses difficult. These challenges include limited access to finance, poor digital skills, inadequate record-keeping, over-reliance on cash, and difficulty attracting skilled workers. The naira redesign, cashless policy, and the resultant cash crunch have exacerbated these problems, making it harder for MSMEs to survive. The reduced cash withdrawal limits, particularly, have hit small businesses hard, resulting in decreased sales volumes and economic slowdown. As a result, the policy has hurt MSMEs without access to digital payment platforms. This paper focuses on reviewing the naira redesign and its effect on MSMEs. As a recommendation, the government and the Central Bank of Nigeria (CBN) should invest in infrastructure development, digital skills training, and creating an enabling regulatory environment for fintech solutions aimed at MSMEs.