Exploration of Covid-19 and Its Impact on Sustainability of Small and Medium Scale Business on Nigeria
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
From time immemorial, regions and continents have been relatively isolated and trade and desire to conquer other regions has been the major reasons for interaction and racial mix. However, due to technological advancement, technological divide, globalisation and tourism there is an increase in the level of migration between nations and the national geographical boundaries of countries of the world have become porous. This porosity has made it possible for innovations and global ideas to be transmitted between continents likewise the diseases and infections from one community outbreak to global epidemic and pandemic.
The first and mother of all epidemic outbreak which hit the global world is the Spanish influenza. An estimated one third of the world’s population (500 million persons) were infected and had clinically apparent illness between the 1918 – 1919. Recent study have shown that the deadly influenza was of no Spanish origin, instead it is likely that deadly virus developed in “Etaples”, an enormous military staging camp in Northern France, where at any one time, no less than 100,000 men could be found in close proximity to both pigs and poultry. This deadly strain of flu struck in March of 1918 in the military training camps of the United States of America where soldiers awaited shipment to the war in Europe. Beginning in Camp Funston in Kansas, the virus spread to other camps and via troop ships to Europe. In the course of three months 43.000 American soldiers succumbed to the disease.
Most strains of the flu do not kill people directly; rather, death is caused by bacteria, which surge into the embattled lungs of the victim. But the Spanish flu that circulated in 1918-19 was a direct killer. Victims suffered from acute cyanosis, a blue discoloration of the skin and mucous membranes. They vomited and coughed up blood, which also poured uncontrollably from their noses and, in the case of women, from their genitals. The highest death toll occurred among pregnant women: as many as 71 per cent of those infected died. If the woman survived, the foetus invariably did not. Many young people suffered from encephalitis, as the virus chewed away at their brains and spinal cords. And millions experienced acute respiratory distress syndrome, an immunological condition in which disease-fighting cells so overwhelm the lungs in their battle against the invaders that the lung cells themselves become collateral damage, and the victims suffocate.
The deadly virus Spanish Influenza was introduced to Nigeria through S. S. Bida, a merchant from the Gold Coast (presently Ghana) passengers and crews, who arrived via ship from overseas. Thus, coastal ports were the primary focus of the diffusion of the disease. Its spread to the hinterland was facilitated by improvements in transportation technology. Neither maritime quarantine, nor the isolation of patients checked the spread of the disease. In Nigeria at the time, over 500 thousand Nigerians died between 14th of September when the outbreak was first recorded and the mid 1919 when it hitherto went into oblivion.
Several other infectious outbreaks have further ravaged major cities and states of Nigeria such as the Bubonic plague, small pox, cholera, dengue, novel strand of influenza, SARS, HIV/AIDS, Ebola and the novel corona virus. The novel strain of the of the corona virus is a highly contagious disease and the World Health Organization (WHO) has declared it as a global public health emergency (Wang et al., 2021). It is originated in Wuhan, Hubei Province, People’s Republic of China (PRC) in late December 2019, when a case of unidentified pneumonia was reported (Huanget al., 2021). PRC Centres for Disease Control (CDC) experts declared that pneumonia as novel coronavirus pneumonia (NCP) as caused by a novel coronavirus and WHO officially named the disease COVID-19 (Huang et al., 2021). However, the International Committee on Taxonomy of Viruses (ICTV) named the virus as severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). This is a class of β-coronavirus and has many potential natural hosts, intermediate hosts and final hosts.
Covid-19 as named by WHO index case in Nigeria was announced on 27 February 2021, when an Italian citizen in Lagos tested positive for the virus, caused by SARS-CoV-2. On 9th March 2021, a second case of the virus was reported in Ewekoro, Ogun State, a Nigerian citizen who had contact with the Italian citizen. The infectious disease with a mortality rate of varying from 2% to 5% in different geographical locations and a recovery rate of over 90% spread quickly among the various states of Nigeria. Presently, with over 76,207 confirmed cases tests, 67110 discharged and 1201 deaths. The virus is present in 35 states and the Federal Capital Territory (FCT).
On March 11, 2021, the World Health Organization declared the outbreak of the COVID-19 as a global pandemic. To prevent the spread of the disease, many governments across the world imposed national lockdown measures that have led to a dramatic decline in global economic activity. A significant reduction of production, falling demand and job losses occurred across many sectors of national industries worldwide. Small businesses are characterized by exceptional flexibility, a propensity for entrepreneurial ventures, smaller production volumes, simple organizational structure, and informal internal communication (Lazarevic-Moravcevic, 2019, p.106). However, they are generally more vulnerable in times of economic crisis. The early evidence indicates that the impact of theCOVID-19 pandemic on SMEs is worse than the 2008 financial crisis. Given that SMEs are the engines of economies.
Small scale business enterprises utilize local raw materials and technology thereby aiding the realization of the goal of self -reliance. In Nigeria, governments formulate policies aimed at facilitating and empowering the growth and development of the Small scale enterprises due to their contribution to the Nigeria economy like alleviating poverty, employment generation, enhance human development, and improve social welfare of the people. Therefore, the only avenue to alleviate poverty in a sustainable way is to advance economic growth and development via the creation of employment and wealth. In some developing countries, small scale business enterprises are the centre source of income, a breeding ground for entrepreneurs and a provider of employment UNIDO Report (2003) as cited by Kehinde, Abiodu, Adegbuy and Oladimeji (2016).
Small scale businesses constitute a greater percentage of all the registered companies in Nigeria, and they have been in existence for a long time. Many among the small scale industries developed from cottage industries to small enterprises and from small scale to medium and large scale enterprises. Small scale business has been identified as a vehicle for generation of employment opportunities, providing opportunities for entrepreneurial training, development and empowerment for the economy. In the Nigerian economy, the small scale enterprise are the most common form of business; the aim of any economy (either industrialized or not) depends largely on how well managed the small scale industries are, for example, if we take a look at the standard practice of small scale industries in economically developed countries like United Kingdom or United State of America, it can be observed that they depend largely on small scale industries to reach out to the people (Etebefia & Kinkumi, 2013).
There is no specific criterion for classifying business enterprise as a small or medium or large globally. In a study carried out by the international labour organization (ILO, 2005) over 50 definitions were identified by 50 different countries for small scale industries. However, in defining small scale industries, references are usually made to quantitative measures such as number of people employed by the enterprise, investment outlay, the annual sales turnover (sales) and the asset value of the enterprise or combination of these measures. At the moment in Nigeria, following the National Council for Industries NCI (2002) as cited by Etebefia & Akinwumi (2013), small scale industry fall within the categories of enterprise that has a capital of betweenN1.5 million and N50 million including working capital but not including the cost of land occupied or if the enterprise has workforce between 10-50 employee. Currently in Nigeria, small scale industries represent about 90% of the industrial sector in terms of enterprise; they also amount to about 70% of the national industrial development if the threshold is set at 10-70 employee and contributed 10% of the manufacturing sector output and a meagre of 1% of gross domestic product; they also contribute significantly to economic development through employment, job creation and sustainable livelihood.
Economic forecasts issued over April-June 2021 depict an increasingly negative outlook in terms of the scale of the global economic recession triggered by the pandemic. In its June 2021 Economic Outlook, the OECD projected a 6% drop in global GDP, and a 7.6% fall in case of a second pandemic wave by end 2021, with a double digit decline in some of the most hit countries, followed by a modest recovery of 2.8% in 2021 (OECD, 2021). This follows a forecast in late March, which indicated that the initial direct impact of the shutdowns could be a decline in the level of output of between one-fifth to one-quarter in many economies, with consumers’ expenditure potentially dropping by around one-third (OECD, 2021).
In recent weeks, several other international organisations have issued forecasts on aspects of the economic impact of the coronavirus pandemic. The IMF June 2021 Economic Outlook Update projects a decline in global GDP by 4.9 per cent in 2021, 1.9 percentage points below the April forecast, followed by a partial recovery, with growth at 5.4 per cent in 2021 (IMF, 2021). The June 2021 World Investment Report (Unctad, 2021) forecasts a decline in global foreign investment by up to 40% in 2021, with a further decrease by 5-10% in 2021.
The present study seeks to examine the constraint imposed by the global pandemic on the modus operandi of Medium and Small Scale Businesses in Nigeria. The study x-ray the impact of the imposed border restriction and the lockdown on the business operations and the crippling of the financial sector as a result of the pandemic.
1.2 STATEMENT OF THE PROBLEM
The Covid-19 Pandemic affected the global economy in two ways: one the spread of the virus encouraged social distancing which led to the shutdown of financial markets, corporate offices, business and events, two, the rate at which the virus was spreading and the heightened uncertainty about how bad the situation could get led to a flight to safety in consumption and investment among consumers and investors (Oziliand Arun, 2021). 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 globally was estimated to be over $4 trillion (Ozili, 2021).Some SMEs cannot survive beyond one month because of cash flow 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 disruptions create a wide range of impacts on companies, and many of them are struggling financially (OECD, 2021). The overall direct initial hit to the level of GDP is typically between 20-50% in many major advanced economies (OECD, 2021). Many companies have had to lay off staff, while others had to reduce their working hours (Edgecliffe-Johnson, 2021). The Pandemic has led to severe global socio-economic disruption, the postponement or cancellation of sporting, religious, political, and cultural events, and widespread shortages of supplies (Turner and Akinremi, 2021). In China, a fall in consumption combines with interruptions to production has disrupted global supply chains affecting firms across the world (Fernades, 2021). The Covid-19 pandemic outbreak has made a lot of business hut down, leading to a monumental disruption 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, 2021).
Furthermore, there has been an increase in social media usage and the internet during the lockdown (Donthum and Gustafsson, 2021). This is a result of loneliness associated with lockdown as people 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). Like many countries across the world are facing unprecedented challenges as a result of the Covid19 Pandemic (UNDP, 2021). Nigeria and her people are no exception. Like Albert Einstein famously proclaimed: “Amid every crisis lies great opportunity” for managers, the Covid-19crisis creates an opportunity to foster transiliency and thus better cope with the next Pandemic (Craighead, Ketchen, and Darby, 2021).
- 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
1.4 RESEARCH QUESTION
The research seeks to provide answers to the following research questions
- What is the impact of COVID-19 imposed lockdown on SMEs operation in Lagos State, Nigeria?
- What are the sustainability strategies adopted by SMEs during the imposed COVID-19 lockdown in Lagos State, Nigeria?
- What are the present challenges facing SMEs as a result of the COVID-19 pandemic in Lagos State, Nigeria?
1.5 SIGNIFICANCE OF THE STUDY
The outcome of this study and its completion provides insight on the economic impact of the COVID-19 pandemic on the operation of the small and medium scale businesses in Lagos State. The result will illuminate the financial implication of the lockdown and the fragility of SMEs to external environment constraint. Also, the outcome of the study further reveals the state of fragility of many SMEs in Nigeria and the significant impact COVID-19 had on these businesses in the weeks after the COVID-19–related disruptions began. The results also provide evidence on businesses’ expectations about the longer-term impact of COVID-19, as well as their perceptions of relief programs offered by the government.
1.6 SCOPE OF THE STUDY
The present study covers the various conceptual aspect bordering COVID-19 and its effect on Small and Medium Enterprise in Lagos state Nigeria. The study will cover the areas of Ojo, Alaba, Okokomaiko, and Trade Fair. The geographical scope is selected by the researcher as it is close to her base of study, which is the Lagos State University and as such offer easy accessibility and convenience.
1.7 ORGANIZATION OF THE STUDY
This study is organized into five chapters. What constitutes each of the chapters is explained below:
Chapter one covers the background of the study, statement of the problem, objective of the study, research questions, research hypotheses, significance of the study, delimitation of the study, organization of the study and finally definitions of significant terms.
Chapter two deals with the literature review which is organized in the following themes; Economic Crisis and covid-19, COVID-19 Spill-over to the Nigerian Economy, Using Monetary and Fiscal Policy Measures, Structural factors that Worsen the Economic Crisis, Small and Medium Scale Enterprise, SMES in Nigeria, Contributions of Small Scale Business to Economic Development in Nigeria, SMES in Latin Americas and other Countries, Main Sources of Financing SMES in Nigeria, The Nature of Small Scale Enterprise, Government Intervention in Small-Scale Enterprises, Challenges of Small Scale Enterprises in Nigeria, Government Intervention to Stimulate the Establishment of Small Scale Enterprises, Prospects of Small Scale Enterprises, Survival of Small-Scale Businesses in a Turbulent Environment, Factors in the External Environment of an Organization, Covid-19 and SMES in Nigeria, Sustainability of SMES in COVID-19, Digital Transformation.
Chapter three presents the research methodology by considering the research design, area of study, sources of data collection, instruments for data collection, population of the study, sample and target population sample size sampling procedure data collection and analysis techniques to be used.
Chapter four deals with data analysis, presentation, interpretation and the discussion of findings.
Chapter five presents as summary of the findings of the study conclusions and recommendations.
1.8 OPERATIONAL DEFINITION OF TERMS
SMEs: This refers to businesses with minimal capital and small amount of staff.
Sustainability: This refers to the methods and strategies adopted by business owners to remain afloat and thrive.
COVID-19: A novel form of corona virus which is transmittable from human to human through contact.
Lockdown: The imposed restriction in movement of persons across geographical boundaries and within state as a measure of curtailing the spread.
Social Distancing: Also called “physical distancing,” means keeping a safe space between yourself and other people who are not from your household with a distance of at least 6 feet (about 2 arms’ length) from other people who are not from your household in both indoor and outdoor spaces.
Work from Home: WFH means an employee is working from their house, apartment, or place of residence, rather than working from the office
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