Business Administration Project Topics

A Critical Analysis on the Effect of E-naira on SMEs in Nigeria



Background of the study

Many impoverished individuals in emerging nations face declining living conditions and unemployment as a result of economic downturns. This has been exacerbated by the fact that the formal economy has been steadily losing jobs while many people have been laid off (Abraham, 2003; DTI, 2004). As a result, hundreds of new job seekers, the bulk of whom are young, have joined the ranks of the unemployed. While this is typical of third-world economies, instead of loitering on the streets, most young people have turned to creative innovation and startups, also known as small and medium-sized businesses.

Despite the difficulty in determining particular percentages due to the fragmented structure of global data and varying definitions of SMEs, small and medium firms play a significant role in a country’s growth (Feeney and Riding, 1997). SMEs contribute to economic growth in a variety of ways, including bringing desirable sustainability and innovation to the economy as a whole, as well as producing jobs for the rising labor force in rural and urban areas. Furthermore, a substantial number of individuals rely on small and medium businesses, either directly or indirectly. The growth of SMEs is considered as a strategy to speed up the attainment of broader socioeconomic goals, such as poverty reduction. However, lack of access to money, poor record administration, and unfavorable government legislation have all been identified as major barriers to SMEs expanding globally (Fida, 2008)

Surprisingly, recent advancements in digital technology and creative business models constitute a game changer that can help reduce the SME finance gap by allowing smaller businesses to access alternative sources of capital via data created by their digital footprint. Retail payment for items may be made simple for financial transactions in commercial operations through the digitalization of currencies. A more developed and mature electronic environment plays an important role in e-transaction by encouraging a shift from traditional modes of payment (such as cash, checks, or any other form of paper-based legal tender) to electronic alternatives (such as e-tranzact, Western Union money transfer, and pocketmonie), thereby closing the e-commerce loop and providing SME’s with a shift in their system of operation (Business Blog 2018). E-commerce and the sharing economy’s increased access to markets and new business models for SMEs, as well as data-driven business prospects emerging from data sharing under open banking frameworks, are major facilitators for digitalization.

The usage of digital currencies is typically regarded as a complement to traditional financial transactions rather than as a required or beneficial replacement. Digital currencies (also known as digital money, electronic money, or electronic currency), whether privately or publicly issued, are a sort of cash available in digital form, according to Gilbert, Scott, and Loi, Hio. (2018). Virtual currencies, cryptocurrencies, and central bank digital currencies are examples (CBDC). The article goes on to say that digital money can be centralized, with a single point of control over the money supply, or decentralized, with power over the money supply coming from a variety of places. With the benefits of security, speed, minimum transaction fees, ease of storage, and relevance in the digital era, digital currencies have the potential to drastically revolutionize payments, banking, central banking, and the balance of economic power.

Taking advantage of fast technical advancement and financial market growth, international economies have begun to transition from paper to digital money, with Nigeria not far behind. In his study, Emmanuel O. (2021) stated that about central banks around the world are delicately working on their digital currency by gradually weaning themselves off rapidly-declining cash payments, which is why the Central Bank of Nigeria joined the fray so that Nigeria is not left behind, which led to the launch of her e-Naira ( Although this new e-Naira invention looks to be promising as a transformation in Nigeria’s financial environment, it is important to consider what this innovation means for small and medium-sized enterprises.

 Statement of the problem

Nigeria’s economy has recently benefited from the increased number of small and medium-sized businesses. While this is commendable, most SMEs face a number of challenges, ranging from environmental issues such as poor availability of basic infrastructures, elliptic power supply, unfavorable economic policies, theft and robbery to the challenge of receiving counterfeit Naira notes, difficulties in providing customers with balance after purchases, inability to manage business funds without diverting them to personal needs,  inability to perform cross-border transactions and challenges of poor e-banking services encountered while using Point Of Sales  machines in their business (Adidu, 2016). These challenges have been of a major concern to researchers as they have subsequently led to the liquidation of numerous SMEs in society, hence revealing the need for an alternative mode of payment which e-Naira anticipates to offer.

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Abdulkareem (2021) asserts that the development of the e-Naira platform has been presented to facilitate different financial services which do not only profit individual users but also business entities, with the ability to manage some of the challenges of SMEs as outlined above. This was emphasized by CBN in  Premium Time (2021) publication that “for businesses, e-Naira would help customers to pay for services with such ease as well as keep them coming back and it would help businesses’ base spreads beyond cross-border transaction and exchange would become   possible, fast and cheap”.  While this is arguable with no research yet to to agree to this has created the gap for the study. Thus, should e-naira be adopted as a general legal tender for financial transactions, what will be the effect on SME’s operations  in Nigeria?. In a bid to answer this elicited the need for the study as it seeks to present a critical analysis of the effect of e-naira on SME’s in Nigeria.

Objective of the study

The broad objective of this study is to present a critical analysis on the effect of e-naira on SME’s in Nigeria. Specifically the study seek to:

i.          Identify the challenges faced by SMEs which will be revolved through the use of e-Naira platform.

ii.        Investigate if e-Naira platform will facilitate swift flow of financial transaction and retail payment between SMEs and her customers.

iii.      Investigate if e-Naira promotes efficient and straightforward cross-border transactions for SMEs.

  Research Hypotheses

HO1: e-Naira platform will not facilitate swift flow of financial transaction and retail payment between SMEs and her customers.

HO2: e-Naira will not promote efficient and effective cross-border transactions for SMEs.

 Significance of the study

Findings from the study will be relevant to SMEs owners and managers, and students and researchers. To SMEs owners and managers, this study will educate them on the various challenges they do encounter in their daily business operation and how e-Naira will resolve the challenges. More so, the study will enlighten them on whether or not e-Naira platform facilitate swift flow of financial exchange between SMEs and her customers. Also whether or not e-Naira promote efficient and straightforward cross-border transactions for SMEs.  To students and researchers, this study will immensely serve as a source of information to them when conducting a research in related topics.

  Scope of the study

The broad objective of this study is to present a critical analysis on the effect of e-naira on SME’s in Nigeria.  The study will further  investigate if e-Naira platform will facilitate swift flow of financial transaction and retail payment between SMEs and her customers. The study is however delimited to selected SME’s in Asaba Metropolis in Delta State.

Limitation of the study

Like in every human endeavour, the researchers encountered slight constraints while carrying out the study. The significant constraint was the scanty literature on the subject owing that it is a new discourse thus the researcher incurred more financial expenses and much time was required in sourcing for the relevant materials, literature, or information and in the process of data collection, which is why the researcher resorted to a limited choice of sample size. Additionally, the researcher will simultaneously engage in this study with other academic work. However in spite of the constraint all these constraint were downplayed to give the best.

 Definition of terms

SMEs: Small and medium-sized enterprises (SMEs) or small and medium-sized businesses (SMBs) are businesses whose personnel numbers fall below certain limits.

Digital Currency: Digital currencies are monies that exist not in physical form but only as electronic data, but perform the basic functions of money being unit of account, store of value and means of exchange.

eNaira: eNaira is the name given to the CBN’s first proposed digital currency. eNaira is a central bank digital currency (CBDC) issued by the Central Bank of Nigeria as a legal tender. It is the digital form of the Naira and will be used just like cash.