EVALUATING THE IMPACT OF COVID-19 ON SMALL AND MEDIUM SCALE ENTERPRISES IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

First and foremost the corona virus outbreak is a human tragedy, affecting hundreds of thousands of people and have also impacted on the global economy. The outbreak is moving quickly, and affecting almost everything including human lives. Small and medium enterprises (SMEs), which generate 90% of employment, constitute 80% of exports, and account for 70% of GDP, have been hit particularly hard. To measure the impact of COVID-19 on SMEs, rapid follow-up surveys need to be done to some states which are largely representative at the state level and the major industrial level for Nigeria as a whole. To measure the impact of COVID-19 on SMEs, a rapid follow-up survey have to be done to some states which are largely representative at the state level and also the major industrial level for Nigeria as an entire. The follow-up survey will ask about the resumption of production, moreover the various challenges enterprises face, including: How long can the firms’ current income sustain the firms’ survival? What are the foremost important binding constraints facing enterprises? What are the entrepreneurs’ subjective assessments on the economic outlook? The follow-up survey will be linked with firms’ background information gathered in 2017-2019, like export status, firm size, supply chain, share of workers from other states, and so on. SMEs are struggling to survive. A particular percent of the firms that will be surveyed will be unable to last beyond a month on an income basis, and beyond three months, presenting a dire picture for Small and Medium scale Enterprise bankruptcies under an extended epidemic scenario. Obstacles to small business operations vary along the availability chain, with upstream firms mainly tormented by labour shortages, while downstream firms face more serious challenges associated with supply chains and consumer demand. There are large heterogeneities across sectors. For example, export firms suffered quite non-export firms because they have a tendency to use more migrant workers and their suppliers are highly concentrated. They held more pessimistic views on business prospects than non-exporters. In fact, Nigeria’s exports have dropped this year. The slowdown in Nigeria’s exports has huge implications on the steadiness of the country’s supply chain. The resumption of production within the consumer and business service sectors are low within the industrial sector. Consumers are petrified of eating out, watching movies in cinemas, and sending children to participate in extracurricular activities. Most business travel cancelled, and trade fairs postponed. Given the lingering fears of consumers and firms, it''''''''''''''''ll take an extended time for the service sector to recover than the manufacturing sector only if the service sector’s share of total GDP has increased by quite 10 percentage points, when the SARS epidemic occurred, the impact of COVID-19 on the Nigerian economy is predicted to be larger than that of SARS. Additionally to sectoral differences, SMEs in several countries other than Nigeria will face different bottlenecks obstructing work resumption. Disruptions in logistics are very important factors. Politics at many firms is scattershot, especially at people who haven’t yet seen the corona virus directly. Many professional-services and tech companies lean very conservative and their protection mechanisms often raise a perception of safety without actually keeping people safer. For example, temperature checks might not be the foremost effective kind of screening, only if the virus may transmit asymptomatically. Asking employees to remain reception if they''''''''''''''''re unwell may do more to cut back transmissibility. Such policies are more practical if employees receive compensation protection—and insulation from other consequences too.  A ban on travel without a concomitant work-from-home policy can make the office very crowded, resulting in higher risk of transmission. Others are adopting company-wide policies stupidly through the requirements of every location and every employee segment. During this scenario, a worldwide slowdown would affect small and mid-size companies more acutely. Less developed economies would suffer quite advanced economies. And not all sectors are equally affected during this scenario. In trade goods, the steep visit consumer demand will likely mean delayed demand. This has implications for the numerous consumer companies (and their suppliers) that care for thin working-capital margins. But demand returns in May–June as concern about the virus diminishes. For many other sectors, the impact may be a function primarily of the visit national and global GDP, instead of an immediate impact of changed behaviours. Oil and gas, for example, are adversely affected as oil prices stay not up to expected until Q3.The overriding goal of containing the pandemic, which is being administered with excess alacrity among the lower echelons, is another key factor. COVID-19 has landed an important blow on Nigerian SMEs, with huge differential effects across sectors and regions. Policies geared toward work resumption should consider the characteristics of every industry and avoid a one-size-fits-all approach. The decision-making should be passed to local governments and entrepreneurs, allowing them to handle specific problems and seek the foremost reasonable and viable work resumption solutions. Only if COVID-19 has now spread to numerous other countries, the findings on its impact on SMEs in Nigeria may additionally be relevant elsewhere if an analogous kind of lockdown strategy is adopted. Given the larger share of the service sector in total GDP in developing countries, negative impacts are likely to be more pronounced there. This research work is intended to provide help to business leaders with a perspective on the evolving situation and implications for their enterprises.

1.2 STATEMENT OF THE PROBLEM

It is important to assess the socio-economic impact of COVID-19, although the pandemic is at a less advanced stage in Africa and Nigeria as a whole, thanks to its lesser quantity of international migrants’ arrivals relative to Asia, Europe, and North America and robust precaution measures in some African countries. African economies remain informal and extremely extroverted and at risk of external shocks. The outbreak of corona virus disease (COVID-19) pandemic in Nigeria has increased the extent of tension and anxiety among citizens within the country. The virus unlike other cases we''''''''''''''''ve got had during this country is extremely transmittable with severe signs and symptoms. Many SMEs struggle to satisfy the COVID-19 prevention requirements from the regime agencies. Some local governments also push the burden of COVID-19 prevention entirely on businesses. If one COVID-19 case cluster shows up in a business, the business will be closed for a longer period. Upstream SME closures are felt by downstream factories that are relying on the parts they produce for SMEs. Without the parts and necessary logistics to bring in materials and ship out products, many factories can barely produce or have no place to store the products. Most of the international shipping companies are slow in getting back to work because of the ongoing epidemic and various travel bans. Because of the widespread low market demand, many small businesses have found that reopening only means they continue to pay rent and salaries without revenue. Many will pay staff minimal wages or lay off staff, which can further reduce demand.

1.3 AIM AND OBJECTIVES OF THE STUDY

The major purpose of this study is to evaluate the impact of corona virus (COVID-19) on small and medium scale enterprises. Other general objectives of the study are:

1.  To examine the causes of corona virus disease (COVID-19)

2.  To examine the level of corona virus disease in Nigeria.

3.  To determine the impact of corona virus disease (COVID-19) on  small and medium scale enterprises in Nigeria

4.  To examine the impact of the pandemic on small and medium scale enterprises sales and worker availability in Nigeria

5.  To examine the relationship between corona virus disease (COVID-19) and small and medium scale enterprises in Nigeria

6.  To recommend preventive measure to be adopted by the Nigeria government in fight against the corona virus disease (COVID-19)

1.4 RESEARCH QUESTIONS

1.  What are the causes of corona virus disease (COVID-19)?

2.  What is the level of corona virus disease in Nigeria?

3.  What are the impacts of corona virus disease (COVID-19) on small and medium scale enterprises in Nigeria?

4.  How is the impact of the pandemic on small and medium scale enterprises sales and worker availability in Nigeria?

5.  What is the relationship between corona virus disease (COVID-19) and small and medium scale enterprises in Nigeria?

6.  What are the recommended preventive measures to be adopted by the Nigeria government in fight against the corona virus disease (COVID-19)?

1.5 RESEARCH HYPOTHESES

Hypothesis 1

H0: Small and medium scale enterprises are not significantly affected by corona virus (COVID-19)

H1: Small and medium scale enterprises are significantly affected by corona virus (COVID-19)

Hypothesis 2

H0: There is no significant relationship between corona virus disease (COVID-19) and small and medium scale enterprises in Nigeria

H1: There is a significant relationship between corona virus disease (COVID-19) and small and medium scale enterprises in Nigeria

1.6 SIGNIFICANCE OF THE STUDY

Small and Medium scale Enterprises are affected by the current COVID-19 pandemic, the findings on early evidence and estimates about the impact, provides a preliminary inventory of Nigeria responses to foster SME resilience.  Given  the  rapid  pace  of  developments,  the  overview  of  country  responses  is  not comprehensive and in some cases includes intended policy responses that are still a work in progress, or simply at the stage of public announcements.

The study on evaluating the impact of corona virus disease (COVID-19) on small and medium scale enterprises will be of immense benefit to all the Nigeria citizens, the industrial sector, and the federal government of Nigeria. The study will explore the causes of corona virus disease (COVID-19), the level, and the impact of the corona virus disease (COVID-19) on small and medium scale enterprises.

The study will educate the small and medium scale enterprises on the policy responses to curb the impact of the corona virus disease (COVID-19) and how to improve the sales and workers availability during this period. The study will serve as a repository of information to other researchers that desire to carry out similar research on the above topic. Finally the study will contribute to the body of the existing literature on the impact of corona virus disease (COVID-19) on small and medium scale enterprises.

1.7 SCOPE OF THE STUDY

The study is based on the evaluating the impact of corona virus disease (COVID-19) on small and medium scale enterprises in Nigeria.

1.8 LIMITATION OF THE STUDY

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.9 DEFINITION OF TERMS

Corona Virus Pandemic (COVID-19): Corona virus disease (COVID-19) is an infectious disease caused by a new virus. The disease causes respiratory illness (like the flu) with symptoms such as a cough, fever, and in more severe cases, difficulty breathing. You can protect yourself by washing your hands frequently, avoiding touching your face, and avoiding close contact (1 meter or 3 feet) with people who are unwell.

Health: Health, as defined by the World Health Organization (WHO), is "a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity. Health may be defined as the ability to adapt and manage physical, mental and social challenges throughout life.

Small and Medium scale Enterprise: A small scale enterprise, or more simply, a small business, is one marked by a limited number of employees and a limited flow of finances and materials. Small and medium-sized enterprises (SMEs) are companies whose headcount or turnover falls below certain limits. According to the World Bank’s definition, an SME has no more than 300 employees and annual turnover / total assets no more than US$ 15 million.