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CHAPTER ONE

INTRODUCTION

1.1   Background to the study

The SME sector is the backbone of major developed economies, as well as important contributors to employment, economic and export growth. In South Africa, SMEs account for 91% of businesses, 60% of employment and contribute 52% of total GDP. In Nigeria, SMEs contribute 48% of national GDP, account for 96% of businesses and 84% of employment. Despite the significant contribution of SMEs to the Nigerian economy, challenges still persist that hinder the growth and development of the sector. According to the Nigeria Bureau of Statistics, small and medium scale enterprises (SMEs) in Nigeria have contributed about 48% of the national GDP in the last five years. With a total number of about 17.4 million, they account for about 50% of industrial jobs and nearly 90% of the manufacturing sector, in terms of number of enterprises. Though significant growth has been achieved in the MSME sector, there is still much to be done. According to an article on “developing Africa through effective, socially responsible investing”, “there still exists a ‘missing middle’, which finds it hard to access funds due to the category of funding they belong to.” Other challenges encountered by the sector include lack of skilled manpower, multiplicity of taxes, high cost of doing business, among others. According to the 2010 Survey report on SMEs in Nigeria conducted by the National Bureau of Statistics (NBS) in collaboration with SMEDAN, the SME sector in Nigeria is strategically positioned to absorb up to 80 percent of jobs, improve per capita income, increase value addition to raw materials supply, improve export earnings, enhance capacity utilization in key industries and unlock economic expansion and GDP growth.

The coronavirus disease 2019 (COVID-19) developed in a densely populated manufacturing and transport hub in Wuhan central China and has since spread to more than 70 other countries with confirmed cases of over 90,000 infections globally (as of 3 March 2020). The coronavirus disease can infect both animals and people and can cause a range of respiratory illnesses from the common cold to more dangerous conditions like Severe Acute Respiratory Syndrome, or SARS. Corona virus a health-related issue but then one thing is sure; coronavirus is a big risk to business. This risk is recognized and visible, it is likely to have significant implications on key macroeconomic indicators like oil price, stock market performance, interest rates, more importantly businesses and its environment. Therefore, as a business owner, entrepreneur or SME operators have to be relatively concerned about the development and equally track the progress of the outbreak going forward.

This will help in no small measure to come up with ideas to scale through the difficult time the outbreak has presented. The emergence of the coronavirus in Nigeria is a bad indicator for our economic performance. If the spread is not curtailed immediately it might have a negative impact on bilateral cross-border relations, inflow of Foreign Direct Investment, employments, imports and export trades, industrial activity, tourism, air travels, social events, schools and more than likely it might disrupt or crash the economic forecasts and revenue estimates of the nation. This arrival might cause inflation and equally impact negatively on many businesses particularly SMEs given high uncertainty around production and demand if the virus continues to spread.

Therefore, it is important to be proactive and strategize in business. Because it is unclear how fast and how far it might spread and again the uncertainties surround the virus’s is a huge cause for concern. The impact of the disease in the coming days might also become much larger if the coronavirus spreads without meaningful intervention. Though it is still too early to measure the full financial impact of the disease on our economy, but the early signs don’t look good. Recall, the major import trading partner of Nigeria is China and China is the second-largest economy in the world. Exports from China to Nigeria were captured as US$1.04 Billion during 2018 and were on the increase in 2019 according to the United Nations.  Therefore, with the current state of things in China the percentage of export trade from that country is likely to be affected. The demand for Chinese products into the country through exports might suffer declines. If this happens, we might likely experience shortage of imported goods and raw materials which can inform general rise in the cost of goods and services. Because with millions of workers now in quarantine and many of the manufacturing plants shut down, China is struggling to get economic activity back on track. The relative importance of China in the worldwide economic landscape will more than likely cause a domino effect in the value chain across the world and possibly stagflation in Nigeria. Consequently, for the global economy this event can lead to travel bans and economic recession considering the outbreak of the virus have been detected in many developed countries globally. The economic impact of the deadly virus is very high and perhaps with the post-Brexit effect, and US-China trade war the year 2020 might be a year of market dislocations and difficult time for many economies especially on international trades.

Due to the aggravated response of this disease on the economy of the country, it is imperative that we evaluate the effect of this pandemic and small and medium scale enterprises which also bore the brunt of the social distancing and total lockdown measures.

1.2   Statement of problems

The federal government ordered the close down of schools, religious and even official gatherings during the outbreak of the Corona Virus disease, the socio-economic impact of the COVID outbreak is pretty substantial. National economies have become isolated with stalemates in key sectors. Many people have lost employment, and agricultural fields have been abandoned in the most-affected rural areas. Livelihoods of households and communities have deteriorated. The education of an estimated 5 million children and youth has been set back as schools closed down indefinitely. The outbreak has strained the finances of governments. Additional expenditure to contain the COVID crisis amidst drastic shortfalls in domestic revenue has increased national deficits. Majority of the people who had to shut down so as to prevent themselves from this menace are the small and medium scale enterprises

The COVID-19 has caused huge market and work disruptions in the value chain of these following sectors in aviation, retail businesses education, automobile, Hi-Tech, tourism, entertainment, hospitality, electronics, consumer and luxury goods. Already big companies like Apple, Hyundai, Kia have announced strategic plans to cushion the effect of the disease, with most of them reducing their revenue targets. However, stock prices of many blue-chip companies across the globe especially where high numbers of cases have been reported are already falling due to the surge in coronavirus cases. More so stock market performances across the globe have been fluctuating with larger percentage reacting negatively to the impact of the incidence.

Nonetheless, the good news is that the current level of detections and quarantined in Nigeria is controllable and manageable. More so the disease’s fatality ratio in Nigeria is still low, but the real subject matter for the government and other economic policymakers, is to see that the virus is short-lived and is contained quickly. Because generally in Africa we lack effective surveillance, diagnostic, and hospital capacities to identify, isolate, and treat patients during such outbreak.

This weak system may increase the possibility of contagion if not well managed and this could have both social and economic consequences. The Federal and States governments, including the public health agencies, have this all-important responsibility; that is to prevent the pandemic from spreading beyond control and also put measures in place to keep it from happening again. It is essential to start vigorous awareness campaign and this needs to be accelerated to keep citizenry informed about the disease pattern, early signs and what to do if such cases are noticed.

It is widely believed that this event will be only a temporary disruption, but so far, the virus has proven to be difficult to contain and hard to predict. However, while the future is uncertain what businesses as part of their contingency plan to cushion the anticipated effect of the surge of the disease is to strongly imbibe technology usage and adopt effective use of social media marketing, campaign and advertisements for their products and services. SME operators, entrepreneurs including large firms should move closer to clients by encouraging delivery services, design strategic plans to drive and strengthen sales, and protect employees so that revenue targets for year 2020 will be met. Hence the researchers urge to investigate the effect of corona virus on small and medium scale enterprises

1.3   Research Objectives

The general objective of this research is to investigate the effect of corona virus on small and medium scale enterprises

The specific objective of the research is to determine the following:

1.   The direct impact of the Corona Virus pandemic on structures and systems impact of Nigeria's private sector

2.   The downstream effects of the lockdown order due to corona virus on SMEs.

3.   The effect of social distancing on the productivity of small and medium scale enterprises

4.   Immediate and medium-term risks which could undermine recovery efforts and outcomes if no mitigating measures are put in place

1.4   Research Questions

1.What are the direct impact of the Corona Virus pandemic on structures and systems impact of Nigeria's private sector?

2. What are the downstream ripple effects of the lockdown order due to corona virus on SMEs?

3. What are the effects of social distancing and hand washing on the productivity of small and medium scale enterprises?

4.What are the immediate and medium-term risks which could undermine recovery efforts and outcomes if no mitigating measures are put in place?

1.5   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.

1.6   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.

1.7   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

Company: A company, abbreviated as co., is a legal entity made up of an association of people, be they natural, legal, or a mixture of both, for carrying on a commercial or industrial enterprise

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

Polymerase Chain Reaction: Polymerase chain reaction is a medical test widely used in molecular biology to rapidly make millions to billions of copies of a specific DNA sample allowing scientists to take a very small sample of DNA and amplify it to a large enough amount to study in detail


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