Exploration of Covid-19 and Its Impact on Sustainability of Small and Medium Scale Business in Nigeria
CHAPTER ONE
PURPOSE OF THE STUDY
The purpose of this study is to explore COVID-19 and its impacts on the sustainability of small and medium scale business in Nigeria. The study examines critically the following major objectives:
- To explore the impact of COVID-19 imposed lockdown on SMEs operation in Lagos State, Nigeria;
- To explore the sustainability strategies adopted by SMEs during the imposed COVID-19 lockdown in Lagos State, Nigeria;
- To explore the present challenges facing SMEs as a result of the COVID-19 pandemic in Lagos State, Nigeria
CHAPTER TWO
REVIEW OF RELATED LITERATURE
CONCEPTUAL FRMEWORK
ECONOMIC CRISIS AND COVID-19
The literature on economic crisis is vast. Morales and Juan (2012), in their analysis of the economic crisis in Bolivia, show that Bolivia suffered from major external shocks, including the rise in world interest rates in the early 1980s, the cut-off in lending from the international capital markets, and the decline in world prices of Bolivia’s commodity exports. Bolivia also witnessed hyperinflation from 1984 to 1985 which did not result from the dislocations of war or revolution. The hyperinflation was a disaster for the Bolivian economy because many well-connected rent-seeking individuals made large profit in the hyperinflation. Anybody with access to official foreign exchange from the central bank purchased cheap dollars and sold them at a several hundred percent profit in the black market. Similarly, commercial banks who took deposits at zero interest were lending money at high nominal interest rates. Similarly, the government extended large amounts of low-interest loans to politically powerful landowners which became grants to them as a result of the hyper-inflation (Morales and Juan, 1989).
Honkapohja and Koskela (1999) show that, in the 1990s, Finland experienced a deep depression as its GDP dropped to about 14% and unemployment rose from 3 to almost 20%. This was caused by both bad luck and bad policies. Bad luck took the form of external shocks such as the collapse of trade with the former Soviet Union in 1991 while bad policies took the form of a poorly designed financial regulation and mistaken policy reactions to the onset of the crisis. There was also high private sector’s indebtedness which increased structural unemployment, and this explained why there were few job creations during the economic recovery (Honkapohja and Koskela, 1999). Di-Quirico (2010) show that the 2007-8 global financial crisis affected Italy’s economy due to lack of structural reforms prior to the crisis. Italy had barely recovered from twenty years of political instability and economic decline, and the 2007-8 global financial crisis further worsened the economic situation in Italy.
The widespread corruption (granting business contracts on the basis of political connections rather than by merit), the absence of investment in new projects for economic growth, and the inability of the ruling government to initiate real reforms contributed to the economic crisis in Italy (Di Quirico, 2010). Thailand was affected by the Asian economic crisis. Glassman (2001) showed that the economic crisis in Thailand was rooted in declining profitability of the manufacturing sector during a time of increased global export competition and overcapacity in Asia. This triggered the economic downturn throughout the Asian region, with Thailand falling first because of its significant liabilities, and other countries being pulled into forced devaluation through financial contagion effects (Glassman, 2001).
Nigeria witnessed two economic crises within a decade. The economic crisis of 2009 was as a result of the global financial crisis while the economic crisis in 2016 was as a result of the sudden fall in oil price in the world market. The 2009 recession was caused by a combination of the after-effect of the 2007-8 global financial crisis, poor loan underwriting process in banks, bad risk management practices and poor corporate governance of banks (Sanusi, 2010). Banks were a major cause of the 2009 economic crisis. The 2016 economic crisis was caused by unexpected decline in oil price which led to a sharp drop in oil revenue which severely affected Nigeria’s foreign reserve (Adeniran and Sidiq, 2018). This led to massive balance of payment deficits combined with an already high debt burden which plunged Nigeria into its second recession in a decade.
The literature also show that economic crises have notable consequences. For instance, Carneiro et al (2014) show that the economic crisis in Portugal gave rise to job destruction due to the collapse of existing firms, increasing unemployment rate, increase in the incidence of minimum wage freeze, and also led to an increasing number of temporary workers. Cheong (2001) show that there was increasing income inequality during the Korean economic crisis, while Giannakis and Bruggeman (2017) in their analysis of the economic crisis in Greece observed that rural regions are more resistant to recessionary shocks than urban regions. Other consequences include: high mortality rates from homicide, pneumonia, and alcohol dependence during economic crisis (Khang et al, 2005), and the collapse of many small and medium scale enterprises (Soininen et al, 2012). So far, the literature has not analysed the effect or consequence of a health crisis on the economy. More Specifically, the effect of coronavirus, or Covid-19, on economic activities and performance have not been explored in the literature.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
This chapter focus on the procedures that will be undertaken by the researcher in providing answers to the raised problem, questions and hypotheses identified by the researcher. The chapter will cover subheadings such as research design, population of the study, sampling technique, research instrument, reliability and validity of the research instrument, procedure for data collection, ethical consideration and the method of data analyses.
CHAPTER FOUR
DATA ANALYSIS AND PRESENTATION OF RESULTS
Demographic Data of respondents
CHAPTER FIVE
DISCUSSION OF FINDINGS, CONCLUSION AND RECOMMENDATION
Discussion
The data analysis executed above is illustrating that the negative effect is established on the micro and small business in Ojo, Alaba, Okokomaiko, and Trade Fair in Lagos state due to corona virus (COVID-19). The negative effect is impacting the sales as well as the buying behavior of the customers. The weakening of the business environment in Lagos state is seen due to COVID-19. The challenges faced by the owners of micro and small businesses. The lockdown policy by the government as drastically reduced the sales volume of the small businesses as a result of the weak purchasing power of the customers, because lowering of the buying behavior is also lowering the demand and the supply of goods and services by the offered by the micro and small businesses. As per the survey processes executed, the situation identified will be lasting at least two months more. This will be degrading the small business as well as huge losses will be acquired by the small businesses. Due to this reason, more negative effect as a result of lock down is established on the small business presence in Ojo, Alaba, Okokomaiko, and Trade Fair in Lagos state.
Conclusion
This study was carried out with a core objective of investigating the impact of COVID-19 pandemic on selected small and medium enterprises in Ojo, Alaba, Okokomaiko, and Trade Fair in Lagos state, with a view to ascertaining the impact of lockdown on SMEs engaging in three essentials- food and consumables, pharmaceuticals, wears in Ojo, Alaba, Okokomaiko, and Trade Fair in Lagos state. COVID-19 has emerged as one of the global pandemic health menaces. Researchers are trying to find out the reasons behind these pandemic diseases. As per china, this pandemic disease can be tackled only when response control strategies and tactics are applied. This pandemic disease is worsening the country’s situation. The country gets hampered both in terms of health and economics. With the effect of corona virus, all the business is hindered which have lower down the economic growth of the country. Data were collected with the administration of structured set of questionnaire on 115 SMEs which were selected purposively. On analyzing the data collected it has found that micro and small businesses are seriously hampered due to this pandemic disease. The country is severely suffering as the number of confirmed cases and the death rate is increasing but in the coming days, the country’s economy has also downturned. It is expected that to return and to enhance the economy like before is much hard. It is also much hard to increase the sales of the micro and small business as a result of the country’s total lockdown policy imposed the federal Government of Nigeria. Findings from the analysis showed that the enterprises experienced moderate reduction in production and sales during the lockdown. The reason why there was no spike in reduction in these operations might have been as a result essential commodities and services in which these enterprises engaged in. However, the surveyed enterprises experienced a spike in reduction of contracts and deliveries. The reason for this finding might have been as a result of total closure of other enterprises engaging in non-essential products and services due to stay at home government`s order.
Recommendation
In view of the above, the study makes the following recommendations for the policy makers and all stakeholders in SMEs in Ojo, Alaba, Okokomaiko, and Trade Fair in Lagos state 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 Ojo, Alaba, Okokomaiko, and Trade Fair in Lagos state 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 interest rate could also be embarked on by the appropriate policy makers to make SMEs remain afloat during and after COVID-19 pandemic.
It is further recommended that the government should review the lockdown policy while not contravened with the health guidelines and policy for curbing the COVID- 19 SMEs in Ojo, Alaba, Okokomaiko, and Trade Fair in Lagos state within a very possible short time to enable the country to return to normalcy. More so, researchers must do their research regarding the Covid-19 with every possible outcome because this will help to improve our downturn economy as a result of COVID 19 pandemic to revitalized the performance of our micro and small scale businesses towards self-sustainability and economic growth.
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