BLOG

Millions of SMEs pushed to the brink amid lockdown


Joshua Adekunle happily survived on packets of sweets before the coronavirus-induced lockdown. His entire life was anchored on the daily sales he made under Obalende Bridge in Lagos. All his wares were worth N5,500 and he made daily sales of N500 to N1,000. As little as these were, they took care of him.

But since the announcement of total lockdown in Lagos two weeks ago by President Muhammadu Buhari, Adekunle’s life has seemed hopeless. He has sold all his wares at an auction and spent the money on food.
“My biggest concern now is to eat some food,” Adekunle, who sleeps in a dingily-lit one room at Ajah with four other micro business owners, said.

“I don’t know what to do after the lockdown because there will be no money to start life again,” he said.
A large chunk of Nigeria’s 41.5 million Micro, Small and Medium Enterprises (MSMEs) could go under due to the coronavirus-induced lockdown aimed at halting the spread of the deadly virus.

The measure to control the virus is in line with global best practices, but it will lead to shocks, shutdowns and unprecedented job losses in Nigeria as the Federal Government continues to drag on plans to provide palliatives to help the businesses, analysts say.

Millions of workers will not return to their jobs after the pandemic, with unemployment peaking at 23 percent before the pandemic. The World Bank said in a 2015 report that 40-50 million additional jobs were needed between then and 2030 to reduce poverty and boost inclusive growth. MSMEs contribute 50 percent to Nigeria’s GDP and account for 86.3 percent of jobs (59.6 million jobs in 2017), according to a report by the National Bureau of Statistics (NBS) and the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN).

Ike Ibeabuchi, chief executive of a small-scale manufacturing outfit in Enugu and Abuja, said he has no money to pay his workers because there is no production, distribution and, consequently, revenue.

“The year is lost for some of us who are in small and medium businesses,” Ibeabuchi, who produces chemicals, said. “Even after the pandemic and lockdowns, the consumers will be so poor that they can’t buy, and firms won’t be able to raise prices, even though the situation warrants that.”

In 2016, oil price fell to below $40 per barrel, leading to low foreign exchange inflows into the Nigerian economy that relies on oil proceeds for 75 percent of its revenue and over 90 percent of FX.

Between 2016 and 2017, about 272 MSMEs were forced to shut down, with 180,000 jobs lost, according to a 2017 survey jointly done by NOI Polls, the Manufacturers Association of Nigeria (MAN) and Centre for the Studies of Economies of Africa.

The current situation will be worse, say analysts, with everything from production to supply on lockdown, and recession knocking.

Chukwubuike Nnoli, chief executive of Zubnol Limited, producer of pillows and mattresses in Anambra, has asked his workers to go home. Raw materials he ordered have not arrived and his customers are in their rooms.

Temiloluwa Smyth, CEO of Smyth Couture, a fashion designer, said since the pandemic, people have stopped making outfits as there are no events or occasions to wear them to.

The national survey of MSMEs conducted by NBS and SMEDAN in 2017 said the number of MSMEs has risen from 37 million to 41.5 million MSMEs. The growth is due to the rising number of survivalists who opened micro businesses in the face of economic slump in order to survive. Small businesses face multiple taxation, high energy cost, poor access to credit and infrastructure, but the current situation has combined with these age-old problems to worsen their plight.

“The number of medium-sized enterprises decreased significantly from 4,670 in 2013 to 1,793 in 2017, indicating a 61 percent drop,” the NBS and SMEDAN report, which covered between 2013 and 2017, said. This means that 2,877 firms shut down within four years.

Degun Agboade, president, Nigerian Association of Small and Medium Enterprises (NASME), said the COVID-19 pandemic and lockdown have been devastating for MSMEs in the country, especially for micro businesses who survive on daily incomes.

“The impact has been colossal on us. Everything is totally paralysed and many of us will not be able to recover when all this is over. The impact will be longer than we expect and the government is not doing enough to support us at this time,” he said.

Nigeria’s GDP grew 2.27 percent in the last quarter of 2019, according to the NBS, but this is lower than the population growth of 2.6 percent.

Bongo Adi, a Lagos-based economist, said this is a bleak period for many companies, especially the MSMEs, as no country has been able to arrest the virus.

He said the impact of the pandemic was beyond what the MSMEs could handle, adding that government must create palliative measures.

“The MSMEs cannot solve this because this is not a normal challenge. Their supply and logistics have been cut off from various sources so there is nothing they can do,” he said.

Friday Opara, director, strategic partnership, SMEDAN, said small businesses are on life support now.

“The government should do something to help the small businesses in this pandemic, considering their contribution to GDP and to employment,” Opara said.

“Some grants and loans should be provided for them at a single-digit interest rate with all the funds at the disposal of the coronavirus committee,” he said.

He stressed the need to mobilise small businesses to produce personal protective equipment (PPE) for the hospitals and the general public rather than import them from China.

Abiodun Adedipe, economist and CEO, B. Adedipe Associates, said at a Lagos Business School webinar that businesses, including MSMEs, must intensify internet presence and e-commerce while pursuing operational and cost efficiency in order to stay afloat.

ODINAKA ANUDU & JOSEPHINE OKOJIE

Whatsapp mobile



Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.