Impact of covid 19 on small and medium enterprises in Lagos State

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Impact of covid 19 on small and medium enterprises in Lagos State

Abstract

The aim of this study is to investigate Impact of covid 19 on small and medium enterprises in Lagos State, with a view to ascertaining the impact of lockdown on SMEs engaging in three essentials- food and consumables, pharmaceuticals, oil and gas in Lagos state, Nigeria. Data were collected with the administration of structured set of questionnaire on 100 SMEs which were selected purposively. Findings from the analysis showed that the enterprises experienced moderate reduction in production and sales during the lockdown. However, the surveyed enterprises experienced a spike in reduction of contracts and deliveries. In view of the above, the study makes the following recommendations for the policy makers and all stakeholders in SMEs in Nigeria that: pandemic is still ongoing, a spike reduction in operations and sales of SMEs will metamorphose into cash-trap. This would increase the vulnerability of SMEs in Nigeria to other external shocks. Therefore, the government should set aside emergency fund targeting SMEs in the country. Deferment of taxes or waiver of taxes, lower of interest rate could also be embarked on by the appropriate policy makers to make SMEs remain afloat during and after COVID-19 pandemic.

CHAPTER ONE/INTRODUCTION
Background to the study

Development of small and medium scale enterprises has been a focal point of the various governments of the world, because SMEs have flexible configurations and immensely contributed to nation building respectively (Aderemi et al. 2019; Tehseen & Ramayah, 2015; Kayadibi et al., 2013; Khalique et al., 2011). Generally, the World Bank classified SMEs as businesses with maximum of 300 workers Meanwhile, in Nigeria`s context, small and medium scale enterprises are conceptualized as business entities that have less than 50 employees. Basically, these enterprises possess investment in machinery and equipment that is less or equal to six hundred thousand naira and independently owned and operated with a view to generating job opportunities and meeting sales standard (CBN, 2018). These business entities constituted about 90% of businesses in Nigeria (Gbandi & Amissah, 2014). National Bureau of Statistics (NBS) estimated numbers of SMEs in Nigeria to be 41.4 million. The unique nature of SMEs lies in the utilization of raw materials from local sources, creation of employment, motivation for rural development, entrepreneurship development, mobilization of local savings and platform for self- employment.
However, devastating effects of COVID-19 pandemic on both human and material resources in early 2020 cannot be forgotten in a hurry. The Wuhan-COVID-19 emerged in 2019 in China like the way Ebola did in West Africa in 2014. But, COVID-19 resulted into global pandemic- which spread across the globe without obstruction (WHO, 2020). This novel virus sparked off various restrictions to movement of people, goods and services. The closure of factories alongside reduction in production was not left out due to the stay-indoors orders. This invariably reverberated its effect to activities of SMEs globally.
In the recent time, the novel COVID-19 has motivated research from different fields, ranging from medical, pharmaceuticals, economic, political and social arena in conceptualizing possible multiplier effects of COVID-19 on the global economy. Small and medium-sized enterprises (SMES) are backbone of developing economies. In Nigeria, SMEs have been identified as the drivers of the economy due to their capacity to stimulate productivity, provide employment opportunities and improve welfare of the people (Abosede & Onakoya, 2013; Ariyo, 2005). This is one of the reasons why studies about impact of COVID-19 on SMEs in Nigerian cannot be ignored in the phase of a global pandemic.
As the global economy is currently being ravaged by the COVID-19 pandemic, its aftermath effects on both human and material resources in the world is an undeniable evidence that good health is the driving force behind the growth of economy (Meer et al., 2003; Bloom and Canning, 2000). COVID-19 has brought diverse risks to various economic activities like global financial crisis of 2008 (Dang and Nguyen, 2020). No single country is exonerated from the devastating effects of this novel virus on human and economy, due to the current era of globalization. Meanwhile, Nigeria as the biggest country in Africa in terms of population and economy, has reported 8344 cases of COVID-19, and 246 fatalities as of May 27th. In order to contain further spread of this virus, the government implemented a series of measures ranging from the closure of borders against other nations. Consequently, in March 29th, the government declared a lockdown in three major states, Lagos, and Federal Capital Territory, Abuja – halting all non-essential activities across these states. Later, other remaining states went on lockdown with a ban on interstate movement on non-essential duties.
In the recent times, various analysts have projected fall in aggregate demand and supply, dwindling in exports and rise government expenditure as the negative ripple effects of lockdown across different sectors of the Nigerian economy. However, this lockdown is more likely to make the situation dire for SMEs in the country. SMEs constitutes the larger bulk of businesses in Nigeria. According to National Bureau of Statistics (NBS), SMEs were estimated to be 41.4 million enterprises in Nigeria which provided jobs for over 70% of working population in the country (ILO, 2017). This shows that huge number of people are engaged either directly or indirectly in SMEs. Therefore, any negative economic shocks reverberated by COVID-19 pandemic on these enterprises make over 70% of the Nigerian working population vulnerable to the novel virus.in view of the above, this study aims to examine the aftermath effects of COVID-19 pandemic on Small and Medium Enterprises (SMEs) in Nigeria. The study raised this specific research questions in addressing its objective. What are the effects of COVID-19 pandemic on operations of SMEs in Nigeria? Therefore, considering the contribution of the small and medium enterprises to the employment generation and economic growth of the Nigerian economy, and the inevitable threats and shocks of COVID-19 to the all sectors of the economy, especially SMEs. This study tends to contribute to knowledge by examining how COVID-19 pandemic affected SMEs in Nigeria with a view to identifying the mitigating factors that can ensure the sustainability of the enterprises in post COVID-19 period.

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.

AIM AND OBJECTIVES OF THE STUDY

The major purpose of this study is toImpact of covid 19 on small and medium enterprises in Lagos State
The specific objectives of the study are:

To determine the impact of corona virus disease (COVID-19) on small and medium scale enterprises in Lagos State
To examine the impact of the pandemic on small and medium scale enterprises sales and worker availability in Lagos State
To examine the relationship between corona virus disease (COVID-19) and small and medium scale enterprises in Lagos State
To recommend preventive measure to be adopted by the Nigeria government in fight against the corona virus disease (COVID-19)

RESEARCH QUESTIONS

  1. What are the impact of corona virus disease (COVID-19) on small and medium scale enterprises in Lagos State?
  2. what are the structural impact of the pandemic on small and medium scale enterprises sales and worker availability in Lagos State ?
  3. What are the relationship between corona virus disease (COVID-19) and small and medium scale enterprises in Lagos State?

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

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.

SCOPE OF THE STUDY

The study is based on the impact of corona virus disease (COVID-19) on small and medium scale enterprises The study was restricted to Lagos state Nigeria.

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.
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.

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