This research assessed the effect of exchange rate variation on the micro-economy of Nigeria focusing on firms, customers and small medium scale enterprises (SMEs). The research was prompted by the continuous fluctuations in exchange rate as a result of its consequence on costs of production, firm profitabilities, customer spending power, business sustainability. The research’s primary objectives included; to assess the impact of exchange rate changes on firm profitability; to ascertain the relationship of exchange rate changes on costs of production; to assess the influence of exchange rate change on customers’ behaviour.  The research employed descriptive research design; it is basically correlational research in nature.  The data for the research was exclusively secondary data sourced from various public and international agencies like Central Bank of Nigeria (CBN), National bureau of statistic (NBS), World Bank and International monetary fund (IMF). Regression analysis techniques were employed to determine the relationship between exchange rate fluctuation and performance on the micro-economy of Nigeria. Results indicated that exchange rate fluctuation significantly impacted firm productivity and profitability in negative way. Exchange rate depreciation has effect in increasing costs of production, negatively affecting customers’ purchasing power.  SMEs are particularly sensitive to exchange rate volatility because of its dependence on imported materials and lower capacity. The study concludes that instability of exchange rate poses threat to the effective functioning of micro-economy of the nation and creating uncertainties in the businesses. The study recommended the management of exchange rate to the monetary authority and government policy for sustainability in micro-economy, promotion of local production, and support for small medium scale enterprises (SMEs) in the nation economy, via favourable economic policies and affordable loan facilities.

Keywords: Exchange rate, microeconomic performance, exchange rate volatility, SMEs, profitability, Nigeria.