Exchange Rate Fluctuation, Financial Inclusion and Performance of Small and Medium Scale Enterprises in Southwest Nigeria
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Date
2025-12
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Lead City University, Ibadan
Abstract
This study investigates the impact of exchange rate fluctuations and financial inclusion on the performance of Small and Medium Scale Enterprises (SMEs) in Southwest Nigeria. The research specifically assesses how exchange rate volatility influences cost structure, investment decisions, and cash flow management, while also examining the roles of access to financial services, digital financial tools, and financial literacy in shaping SME growth and operational efficiency. A total of 273 valid responses were analyzed using both descriptive and inferential statistics, including regression and correlation analyses. Results indicate that exchange rate fluctuations significantly affect the cost structure (p = 0.002), investment decisions (p = 0.012), and cash flow management (p = 0.004) of SMEs, although the explanatory power of these relationships is modest. Access to financial services shows a statistically significant positive impact on business growth (R = 0.400; R² = 0.160; p < 0.000), while digital financial services moderately enhance operational efficiency (R = 0.241; R² = 0.058; p < 0.000). Financial literacy demonstrates the strongest effect, significantly influencing the financial decision-making of SME owners (R = 0.536; R² = 0.287; p < 0.000). The findings reveal the importance of financial capability and access to inclusive financial products in mitigating the adverse effects of macroeconomic volatility. The study concludes that SME resilience in a fluctuating economic environment requires integrated strategies involving financial education, improved digital infrastructure, and policy reforms that enhance access to tailored financial services. These measures are essential for promoting sustainable growth, strategic investment, and financial stability among SMEs in Southwest Nigeria.
Keywords: Exchange Rate Fluctuation; Financial Inclusion; SMEs; Financial Literacy; Investment Decisions; Digital Financial Services; Operational Efficiency
Word Count: 298
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Keywords
Exchange Rate Fluctuation, Financial Inclusion, SMEs, Financial Literacy, Investment Decisions, Digital Financial Services, Operational Efficiency
Citation
Kate Turabian