Covid 19 Pandemic and Small and Medium Sized Enterprises Crisis: the Nigerian Experience and Structural Effects

Covid 19 Pandemic and Small and Medium Sized Enterprises Crisis the Nigerian Experience and Structural Effects

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Chapter One of Covid 19 Pandemic and Small and Medium Sized Enterprises Crisis: the Nigerian Experience and Structural Effects

INTRODUCTION

Background to the Study

The Covid-19 Pandemic was one of the occasions that have the most effect on present day history. It spread to more than 216 nations around the globe and prompted the most financial plunge since the Great depression (World Health Organization, 2020; International Monetary Fund, 2020). Covid-19 was first identified in Wuhan, China, in December 2019 and has caused colossal death and has spread to almost all parts of the world (Akanni and Gabriel, 2020). The first case of Covid-19 was identified in Nigeria on February 27, 2020. As indicated by WHO (2020), as of July 28, 2020, 1 pm (GMT+1), the total number of affirmed cases overall was 16,301,736, while there were confirmed death of 650, 069 cases of every 216 nations or regions of the world. As of July 28, 2020, the Nigerian Centre for Disease Control (NCDC) reported 41,804 cases, 18,704 discharged patients, and 868 deaths, and the number of tests in Nigeria was 267,842 (in a population of about 200 million people). No organization was probably going to have arranged for COVID-19, irrespective of business size. Public Health Research has informed entrepreneurs to consistently make for this kind of emergency, however in the genuine sense, only large organizations regularly have formalized plans (Rebmann, Wang, Swick, Reddick and Delrosano, 2013). The 1918 pandemic killed about 40m people worldwide from the early spring 1918 through to late spring 1919 (Turner and Akinremi, 2020). Economists at Goldman Sachs estimated that the United States is likely to have a gross domestic decline of 3.8% for 2020 due to the virus (Hatzius, Phillips, Mericle, Hill, Struyven, Choi, Briggs, Taylor and Walker, 2020). Igwe (2020) noted that the world economy faces the worst- ever economic recession due to the outbreak of the Covid-19. The worldwide economy is relied upon to account for economic losses through three transmission channels: supply chain, demand, and the financial market. These channels will contrarily affect organizations, household consumption, and global exchange.

Covid-19 Pandemic has put pressure on policymakers and supervisory institutions across the globe, sparking off several mitigating initiatives by Government agencies to combat the potential negative social-economic impacts on households and businesses (KPMG, 2020 A pandemic effects both supply and demand (Swift 2009). The Covid-19 Pandemic, generally negative, will affect all organizations, some positively. The Pandemic is still ongoing; therefore, it is not easy to estimate its long-term economic, behavioural, or societal consequences as this aspect has not been done with past Pandemic (Donthum, and Gustafsson, 2020). The COVID-19 outbreak is likely to cause bankruptcy for many well-known brands in many industries as consumers stay at home, and economies are shutdown (Tucker, 2020). The effect of Covid-19 on the worldwide economy is probably going to be exceptional since the 1930s Great Depression (Euronews, 2020). The short term effect of Covid-19 is quickly and easily felt, because of the far reaching lockdown and social distancing measures universally (He and Harris, 2020).

SMEs have an essential influence in social incorporation, innovation in remote areas, and local business (Auzzir et al., 2018). SMEs suffer most in times of crisis and are the least prepared for all organizations. SMEs also lack business continuity plans. Having a solid business congruity plans may help limit any negative effect on business during a pandemic (Turner and Akinremi, 2020). Covid19 has brought about severe challenges for SMEs globally. The adverse effects include interruptions of supply chains, cash flow problems, weaker demand for imported goods and services, inability to meet delivery dates, and increased risk aversion in financial markets. (OECD, 2020). SMEs are vital to the smooth functioning of any economy by ensuring that goods are delivered during and after public emergencies (Burton, Confield, Gasner, and Weisfuse, 2011). The Nigerian economy has experienced devastating effects as a result of Covid-19; this includes, a sharp decline in oil prices, borrowers’ inability to service loans, disturbance of the global supply chain, drop in income and furthermore the pullout of investors fund from the Nigerian stock market (Ozili, 2020).

Lagos is a state located in southwest Nigeria of the 36 states of the federation, Lagos state has the most population of more than 20M (Idowu, 2020). If Lagos state were to be a country in Africa, it would be the 5^th largest economy in Africa. Lagos is known to be the economic centre of Nigeria (Idowu, 2020). As of 24th of January 2021, Lagos state has a total of 44,940 cases out of 41,804 cases in Nigeria. (NCDC). This is about 36% of the number of cases in Nigeria. Therefore, this study will focus on the investigation of the Nigerian experience and structural effects of COVID-19 pandemic on small and medium sized enterprises.

Statement of the Problem

The Covid-19 Pandemic affected the worldwide economy in two aspects: the spread of the virus brought about social distancing which prompted the of  shutdown of almost all the sectors globally which include; financial markets, corporate workplaces, business and several occasions, two, the rate at which the infection was spreading and the heightened uncertainity about how terrible the circumstance could get prompted a trip to wellbeing in  consumption and investment among consumers and investors  (Ozili and Arun, 2020). The travel restriction imposed on people’s movement in many countries led to massive losses for businesses in the events industry, aviation industry entertainment industry, hospitality industry, and the sports industry. The combined loss internationally was assessed to be more than $4 trillion (Ozili, 2020).

Some SMEs cannot survive beyond one month because of cashflow issues (Farrel and Wheat, 2016). Thus SMEs are at high risk for permanent closure after large–scale disasters partially because they cannot pay for their expenses while being shut down (Schrank, Marshall, Hall-Phillips, Wiatt, and Jones, 2013). The coronavirus (Covid19) pandemic has created major disruptions in the economy and the lives of businesses worldwide, whether or not they can continue their operations. These interruptions make a wide scope of effects on organizations, and a whole lot of them are struggling financially (OECD, 2020). The overall direct initial hit to the level of GDP is typically between 20-50% in many major advanced economies (OECD, 2020). Many companies have had to lay off staff, while others had to reduce their working hours (Edgecliffe-Johnson, 2020). The Pandemic prompted serious worldwide socio-economic interruption, the delay or cancellation of sporting, religious, political, and cultural events, and widespread shortages of supplies (Turner and Akinremi, 2020). In China, a fall in consumption consolidates with interferences to production has disturbed worldwide supply chains influencing firms across the world (Fernandes, 2020). The Covid-19 pandemic has made a ton of business shut down, prompting a great disturbance of trade and commerce in many industrial sectors. Retailers and brands face many short term challenges relating to workforce, health and safety, cash flow, supply chain, consumer demand, sales, and marketing. A lot of markets, especially in hospitality and tourism, no longer exist, whereas online shopping, online communication, and online entertainment, have witnessed unprecedented growth (Donthum, and Gustafsson, 2020).

Moreover, there has been an increment in social media usage and the internet during the lockdown ((Donthum and Gustafsson, 2020). This is a consequence of dejection related with lockdown as individuals even prefer social media over physical interaction (Newland, Necka, Cacippo, 2018). Larger firms may be able to survive shocks more than the SMEs because large firms have significant financial resources more than the SMEs (Verbano and Venturi, 2013).

Environmental jolt or risk of an extreme event (Neyer,1982) exposes an SME to higher levels of strategic uncertainty, which impacts upon its everyday activities and may, in some cases, threaten its survival (Sullivan-Taylor and Branicki, 2011 In the same way as other nations across the world are being confronted with remarkable challenges because of the Covid19 Pandemic (UNDP, 2020). Nigeria and her people are no exception. Like Albert Einstein broadly revealed: “In the midst of each crisis lies great opportunity” chance” for managers, the Covid-19 crisis makes a chance to foster transiliency and consequently better adapt to the next Pandemic (Craighead, Ketchen, and Darby, 2020).

Objectives of the Study

The general objective of this study is to investigate the Nigerian experience and structural effects of COVID-19 pandemic on small and medium sized enterprises. The specific objectives of the research is to determine the following:

a)     To understand the direct impact of the Corona Virus pandemic on structures and systems impact of the small and medium sized enterprises in Nigeria

b)    To inquire the importance of the small and medium sized enterprises on the Nigerian economy.

c)     To enumerate the strategies outlined by the leaders of SMEs for post- COVID-19 economic recovery in Nigeria

d)    To highlight the measures taken by the Nigerian Government and agencies to assist SMEs especially in the post COVID-19 period

Research Questions

The following questions were considered to be the research questions for this study:

a)     What is the direct impact of the Corona Virus pandemic on structures and systems impact of the small and medium sized enterprises in Nigeria?

b)    What is the importance of the small and medium sized enterprises on the Nigerian economy?

c)     What are the strategies outlined by the leaders of SMEs for post- COVID-19 economic recovery in Nigeria?

d)    What are the measures taken by the Nigerian Government and agencies to assist SMEs especially in the post- COVID-19 period?

Research Hypotheses

The following statements were considered as the research hypotheses for this study:

a)     There is a significant relationship between Corona Virus pandemic on structures and systems and the small and medium sized enterprises in Nigeria

b)    There is a significant correlation between the small and medium sized enterprises and the Nigerian economy

Significance of the Study

While considerable scholarly attention has been paid to understanding and investigating the direct effects of an epidemic, our understanding of the indirect effects that arise from fear of the disease during an outbreak is limited. We investigated the impact of corona virus on Nigeria’s small and medium scale enterprises. The rapid corona virus response action by both Lagos State and the Federal governments limited the direct impact of corona virus. However, our findings shed considerable light on the role of misinformation and aversion behavior during an outbreak. In this paper, we would investigate the direct and the indirect economic effects of both misinformation and fear-induced aversion behavior, exhibited by individuals, organizations or countries during an outbreak or epidemic. A focus on only the direct effects of an epidemic significantly underestimates the true cost of disease and fails to account for aversion and other fear-related consequences experienced during an epidemic

It is necessary to address dangers of misinformation and fear-induced aversion behavior during an outbreak. Awareness efforts should be combined with swift risk communication, quick dissemination of accurate information and synchronized response to address misinformation and stigma.

The research will add to the body of knowledge on the effects of Corona virus on small and medium scale enterprises for scholars and research to build upon for further research.

Scope of the Study

This study was designed as a cross-sectional mixed-methods study that used semi structured in-depth interviews and a supporting survey to capture the effect of Corona Virus on small and medium scale enterprises in Lagos metropolis.

Definition of Terms

SMEs: Small and medium-sized enterprises

Small And Medium-Sized Enterprises: Small and medium-sized enterprises or small and medium-sized businesses are businesses whose personnel numbers fall below certain limits. The abbreviation “SME” is used by international organizations such as the World Bank, the European Union, the United Nations and the World Trade Organization

Virus: A virus is a small infectious agent that replicates only inside the living cells of an organism. Viruses can infect all types of life forms, from animals and plants to microorganisms, including bacteria and archaea

Pandemic: A pandemic is a disease epidemic that has spread across a large region, for instance multiple continents, or worldwide. A widespread endemic disease with a stable number of infected people is not a pandemic. Further, flu pandemics generally exclude recurrences of seasonal flu.

Epidemic: An epidemic is the rapid spread of disease to a large number of people in a given population within a short period of time. For example, in meningococcal infections, an attack rate in excess of 15 cases per 100,000 people for two consecutive weeks is considered an epidemic

COVID-19: Corona Virus Disease 2019

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