Naira Redesign Policy, Cash Flow Disruptions, and SME Financial Performance in Nigeria

This study empirically examines the effects of Nigeria's 2023 naira redesign policy on the cash flow patterns and financial performance of small and medium enterprises. The Central Bank of Nigeria's decision to redesign high-denomination naira notes in late 2022, combined with withdrawal limits that restricted cash availability, created unprecedented liquidity disruptions for Nigeria's largely cash-dependent SME sector. This study provides a rigorous assessment of how cash flow shocks generated by the policy affected SME financial outcomes, filling a gap in the emerging empirical literature on policy-induced cash flow disruptions in developing economies. Primary survey data were collected from 280 SME operators in Lagos, Aba, and Kano during and immediately after the cash crunch period of January to March 2023. Financial performance metrics include revenue change, operating cost increase, inventory depletion, and debt accumulation during the shock period. Propensity score matching and difference-in-differences estimation are applied by comparing SMEs with varying levels of digital payment adoption. Results reveal that SMEs with pre-existing digital payment infrastructure experienced significantly smaller revenue declines and lower operational stress during the cash shortage. Naira redesign exposure is associated with an average revenue reduction of 34 percent for cash-dependent SMEs in the sample. The study concludes that the financial fragility of cash-dependent Nigerian SMEs creates systemic vulnerability to policy-induced cash flow shocks. It recommends mandatory digital payment infrastructure support for micro and small enterprises as a financial resilience policy.

Keywords: naira redesign, SME performance, cash flow disruption, digital payments, CBN policy.