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THE IMPACT OF COVID 19 ON NIGERIAN SMALL AND MEDIUM SCALE ENTERPRISES
CHAPTER ONE
INTRODUCTION
1.1 Background of the study
In the history of the world, infectious diseases have wreaked havoc among countries. The continuous and emerging global convergence is also influencing the speed of the spread of these infectious diseases. According to the World Health Organisation (WHO), the world has witnessed emergence of several disease outbreaks and epidemics caused by more than 20 infectious agents over the past decade. The emergence of coronavirus-associated diseases (SARS and MERS) inflicted global challenges to public health systems. SARS-CoV-2 (the causative agent for coronavirus disease COVID-19) is the latest addition to this expanding list of novel agents. WHO declared COVID-19 a public health emergency of international concern on 30 January 2020 and a pandemic on 11 March 2020.
Bogoch et al. (2020) report indicated a clustering pneumonia of unknown aetiology in Wuhan, China: potential for international spread via commercial air travel. It is adjudged as to be one of the worst pandemics in human history with a staggering number of more than 1.4 million infections in 177 countries and more than 85 000 deaths globally as at 9th April, 2020.
The quick and successive spread of this virus called COVID-19 pandemic all over the world has meted huge and unprecedented difficult time in history. It became prevalent and began extending virally to the whole world with attendant contraction in the global economy.
The virus was discovered in Nigeria in February 2020. It spread to some cities namely: Lagos, Ogun and FCT. The continual spread of the pandemic led to partial lock down of these cities in the first instance and later, a total lockdown of the whole country in March 2020.
The emergence of COVID-19 pandemic brought about changes worldwide including Nigeria. The changes are summarised as: increased sickness, death, poverty, effect on health, food production, security, money supply, reduced inflow of foreign exchange resulting from lack of export and import of goods and services except for essential products, lack of patronage resulting from restrictions in movement and access, changes in mode of business operation from physical contact to online and many others. The SMEs suffered and are still being affected by the emergence of the pandemic since year 2020. Patronage and cashflow of the SMEs evaluated was seriously impacted by the novel virus plaguing the world economy. This experience triggered negative survival, excitement and sentiment on the continuous infection of this pandemic. Businesses have collapsed and many more are on the verge of extinction due to prevalence of COVID-19 pandemic. Hence, most SMEs with insufficient capital outlay went into economic shock and it is highly unlikely to recover from this shock in the short run.
The various hardship caused by this novel virus informed many countries in the world to enforce containment measures which led to the restrictions on movements nationally and internationally, total lock down and closure of business activities, border to border movement restrictions among others.
As SMEs are vital to economic growth and also contribute to the development of the world economy generally and specifically in developing economies, the SMEs play major role in economic development as employers of labour. Abosede & Onakoya, 2013; Aderemi et al. (2020) summarised that, the SMEs in Nigeria play pivotal role in the economic development resulting from their capacity to stimulate welfare of the people, reduction of unemployment and productivity. Bloom et al. (2001) indicated that health is a key player and a driving force that brings prosperity through economic growth and development. Therefore, absence of good health system and a healthy business environment, business activities cannot thrive successfully. Bloom et al. (2001) earlier noted that pandemics pose negative impacts on economic performance, through poor health.
The prevalence of COVID-19 has instigated various researches in economics, health, environment, manufacturing, agriculture and many more. It is expected that these research work will postulate possible coping strategies or mechanisms and guidelines that will mitigate against future effect of pandemic on SMEs and world economy.
Brounen and Derwall (2010); Hon, Strauss and Yong (2004); Karolyi (2006) likened the effects of pandemics to terrorist attack, which inhibit trade and business activities within affected areas, and has the capacity to lower productivity. Srivastava & Agarwal (2020) indicated that the pandemic has posed the greatest impact on stock markets around the globe, and has caused worst economic meltdown since the 2008 global financial crisis. In recent times, Goodell (2020) agrees that natural disasters and terrorist attacks are similar to the effects of COVID-19 on economic performance, because it inhibits trade and production within places affected. Financial Times (2020) attests to this, noting that the emergence of COVID-19 has created panic in the financial system, causing high volatility in several markets. Akhtaruzzaman et al. (2020) affirms by stressing that many financial and non-financial firms across the globe have been adversely affected by the COVID-19 pandemic, as stock returns are trending downwards these days. Busari and Jaiyeoba (2021) noted that even if the pandemic is resolved, its effects on business and economic performance will linger in the short run.
This study is interrogated by the researcher to elicit government sensitivity in ensuring medium- and long-term planning in health sector are made and reviewed periodically so that whenever SMEs are confronted with pandemics or shock of this nature in the future, they will be able to surmount it and avoid any possible future economic shock. Despite this global effect on the finances of SMEs, the following businesses experienced boom; Telecommunication, Medicaments and medical equipment, businesses involved in the production and supply of essential products, fumigation, decontamination and defogging service providers.
For the purpose of this study, the prospect and games theories were reviewed because of its relativity to the research study.
This study is limited to identifying the cause, source or origin of COVID-19 pandemic, actual number of people that contacted the virus, accurate number of deaths, veracity of claim on the ravenous nature of the virus, empirical and theoretical claim to buttress the argument about the effect or impact of corona virus on the global economy, the possible coping strategies and palliative measures suitable to alleviate the effect of the virus prevalence on SMEs business operation. In addition, the sample size is a limitation because it is only a representative of the SMEs operating business in Nigeria
This study is organised as follows; Chapter 1 (introduction, statement of problem, research objectives, research questions, statement of hypothesis, and significance of the study), Chapter 2 (Context and literature review: Contextual framework, empirical review and theoretical framework, Chapter 3 (Methodology), Chapter 4 (Presentation, analysis, and discussion of findings), Chapter 5 (Conclusion and Recommendation), Chapter 6 (Area of further research).
1.2 Statement of Problem
There are many infectious diseases in the history of the world, but the COVID-19 has proven to be highly infectious, viral and contagious. The effect of this infection on human life is highly unprecedented. This has led to many operators of SMEs to close down business operation, social distancing, and also total compliance to lockdown directives by the Federal Government of Nigeria. The effect of this containment measures also led to a negative effect on the cashflow, supplies, revenue, and lack of patronage on SMEs businesses generally and specifically in Nigeria, Nigeria. In addition, the containment measures such as; total lock down, restrictions on movement affected production level, reduced sales, reduced revenue, caused cash trap, hunger, illness, death, unemployment, poverty among others. These challenges hampered the performance of SMEs in the world at large and specifically on SMEs performance in Nigeria since prevalence of COVID-19 pandemic. The effect of these on SMEs spurred many researchers to commence in-depth study into identifying and defining coping strategies and measures that policy makers, institution and many other stakeholders can adopt in order to avoid similar effect in the future.
The following authors made meaningful contributions into effect of COVID-19 Pandemic on SMEs business performance in Nigeria. They are: Aderemi et al. (2020) —“the Impact of Corona Virus (COVID-19) Pandemic on Small and Medium Scale Enterprises (SMEs) in Nigeria”, Akingbade (2021)—“the challenges of COVID-19 pandemic on Micro, Small and Medium Scale Enterprises in Nigeria”, Otache (2020)—“the effects of Covid-19 Pandemic on Nigeria’s economy and possible coping strategies”, and Oyewale et al. (2020) also provided insight in “ Estimating the impact of COVID-19 pandemic on Small and Medium Scale Enterprises: Evidence from Nigeria”.
In the publication of UNDP, 2020, it was reported that many businesses and countries in the world are facing severe financial and economic crises resulting from the prevalence of Covid-19 Pandemic.
As proclaimed by Albert Einstein: “Amid every crisis lies great opportunity” for managers, the Covid-19 crisis creates an opportunity to foster transiliency and thus better cope with the next Pandemic (Craighead et al., 2020).
1.3. Research Objectives
The key objective of the study is to examine the effect of COVID-19 pandemic on the performance of SMEs in Nigeria. The specific objectives are:
1) To highlight the effect of lock down on the financial performance of SMEs business in Nigeria.
2) To determine the effect of COVID-19 infection on the financial performance of SMEs business in Nigeria.
3) To determine the coping strategies for the financial performance of SMEs business in Nigeria.
1.3. Research Questions
The following research questions were raised in line of the statement of the problem and research objectives.
1) To what extent has lock down affect financial performance of SMEs business in Nigeria?
2) To what extent has COVID-19 infection affected financial performance of SMEs business in Nigeria?
3) How can the coping strategies ameliorate financial performance of SMEs business in Nigeria?
1.4. Statement of Hypotheses
The following null hypotheses were raised in line with the research questions and hypotheses to guide the study.
1) H01: There is no significant relationship between lock down and financial performance of SMEs in Nigeria.
2) H02: There is no significant relationship between COVID-19 infection and financial performance of SMEs in Nigeria.
3) H03: The coping strategy has no effect on financial performance of SMEs in Nigeria.
1.5. Significance of the Study
The study will be of great significance to both policy makers and SMEs in general. Specifically,
● to the policy makers, it would provide the basis for effective policies for the sector’s survival of the covid-19 challenges and also adopt strategies to mitigate likely future occurrence.
● to the SMEs, it would provide an opportunity for diversification, business opportunities and coping strategies now and in the near future.
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