Hi Raj,
Certainly its an overhead to convert it but I have some thoughts on this.
In such a specific case as you describe where it is being used in a procedure via a variable then wouldn't the variable be converted only once for the procedure run? Which I think should not add by much to the overall time taken for the SELECT and the conversion.
So if the requirement is such to use NVARCHAR or NCHAR, one should not hesitate.
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Shreepad