are Nigerian Micro, Small and Medium-sized Enterprises (MSMEs) navigating the
economic disruptions resulting from Covid-19 and how will the impacts affect
their decisions and prospects? To gain insights, we conducted a survey to (a)
ascertain how the MSMEs are coping this period (b) assess the current level of
financial fragility among MSMEs (c) ascertain measures taken to adjust to the
realities of the period (d) ascertain the types of support needed to survive
even after the crisis period.
Overall, the results
suggest that there have been enormous dislocation among small businesses with
many businesses becoming financially fragile and considering layoffs. MSMEs see
great value in collaboration and partnerships. Majority of the businesses see
funding as a major support needed.
Covid-19 pandemic has caused unprecedented panic, and disruptions both for the
public and private sectors. The crisis is considered an existential threat to
the global economy with governments and businesses grappling with the effects.
There has been growing apprehension as to the eventual impact of the pandemic
especially for economies. While the health impact of the crisis is substantial,
the economic effects are no less devastating especially for businesses.
The pandemic has
generated critical challenges for Micro, Small and Medium-Scale Enterprises
(MSMEs) in Nigeria forcing many to shift focus from routine operations to
crisis management and alternative business response efforts. The impact is
already manifesting in the areas of sales/services, measures to cushion the
adverse implications, opportunities, challenges, support measures and chances
of business survival.
survey was aimed at understanding the impact of the Covid-19 crisis on MSMEs
especially considering the early lockdown in Lagos and Abuja, the commercial
and political capitals of the country, and other issues associated with the
period. Specifically, the survey sought to determine the challenges on the
businesses, the nature of measures taken to cushion the effects and also to
examine the type of support needed.
One thousand, six
hundred and seventy four (1674) MSMEs comprising 69% of females and 31% of
males participated in the survey. There was also an experience sharing online
sessions with about 42 leaders of MSMEs. The MSMEs were spread across different
sectors with agriculture (17%), fashion (15%) and manufacturing (10%) having
the highest. This was followed by education (9%), retail (6%) and health (5%).
Other sectors represented include beauty/cosmetics (4%), information technology
(4%), social services (4%), media (3%) and transportation (2%).
the government restricting movements and also the shutdown of business
activities in most parts of the country, MSMEs expectedly are counting losses
in terms of income. This is reflected in the responses as most of the
businesses have experienced low sales/services. Hence, majority (93%) of the
MSMEs reported decline in income while only 7% reported increase in income. This
decline is particularly sharp as only businesses operating in the food,
pharmaceutical and other essential services are allowed to operate although
under apprehensive conditions.
Also as a result of the
lockdowns and associated issues, majority (89%) of the respondents agreed that
they have issues with supply chain for their businesses. Most of them reported
that they are unable to move either the raw materials needed for production or
transport their products due to the restrictions of movement for both human and
goods. This suggests that disruptions have already become extreme. Across the
sample as whole, most businesses are temporarily closed because of the Covid-19
pandemic. The respondents largely point to reductions in demand.
With technology playing
vital roles in business operations, the Covid-19 has presented even more
opportunity for MSMEs to deploy skills and technology tools. Most (74%) of the
respondents reported that they have resorted to technology in their business.
This includes digital marketing, brand promotion, delivery, payments systems
Also, with the
uncertainties and dynamics of the period, majority (88%) of the MSMEs are
re-thinking their business models. The MSMEs are taking decisions to fit the
emerging realities. In spite of the huge challenges MSMEs are facing this
period and with about 93% of the respondents reporting decline in income, it is
interesting to note that majority of them (83%) believe their businesses will
survive even after this period. This clearly shows the resilience and
doggedness of Nigerian MSMEs. While this is indeed the right mindset at this
period, MSMEs must be willing to learn appropriate strategy required for
businesses to thrive and be prepared to implement such processes and practices
that will make their businesses truly thrive.
About 47% of the
respondents are likely to consider new business due to the opportunities and/or
challenges associated with the Covid-19 period, while about 30% are undecided,
22 % are not considering new business. Nearly half (48%) of the respondents
reported creating new product/service this period while about 51% reported in
With the lockdown
resulting to restriction of both vehicular and human movements across cities in
the country, business operations of the MSMEs have been greatly hampered. More
than half (57%) of the MSMEs reported that their sales have been affected, this
is followed by challenges relating to cash flow (52%). The results suggest that
many businesses are financially fragile. Some MSMEs report that they only have
cash to cover only for a short period of time. Usually, businesses with more
cash on hand are relatively more optimistic of staying in business for long.
of business mostly affected
MSMEs also reported
having logistics issues (49%) and about 36% noted having challenges with their
production. Supply chain networks have been disrupted globally and as evidence
suggests, the supply chain of MSMEs have been impacted negatively by the current
crisis. This disruption has increased the cost of business especially for
businesses that have not closed. Other aspects of business operations affected
include salaries (26%), customer services (23%), payments (20%), investments
(9%) and foreign exchange (7%). With dwindling income and wages for employees,
more than half (55%) of the MSMEs are considering laying off employees. Even
for the 44% that has no plans of laying off their workers, reduced productivity
and income are making them think of salary reduction while the situation
For some of the MSMEs,
there is complete shutdown of business activities and this has continued to
affect negatively for the businesses. In essence, while there is decline in
income for some of the MSMEs, unfortunately there are costs that would still be
paid for, such as rents and other fixed costs.
MSMEs are exploring
innovative ways and means of cushioning the effects of these challenging times.
Majority of them have had a rapid response to the pandemic and have taken
measures to thrive. They have shifted focus towards crisis management with
emphasis on measures which will likely evolve after the crisis. The MSMEs see
great value in collaboration and partnerships (45%). About 25% of the MSMEs are
also reducing their production processes to cut costs. 24% of the MSMEs are
offering price slashes and promotion. Interestingly, the COVID-alligned MSMEs
have increased their production to meet market demands. Some are making
diversification plans while there is aggressive online marketing to boost sales
to cushion effect of Covid-19
with about 75% constituted the type of support needed by MSMEs. Apart from
affordable loans, some MSMEs require other forms of financial support including
grant to cope with the challenges of the period. This is followed by technology
support and access to market with 35% each. MSMEs also need mentorship support
(29%), reduced interest rate (22%) and extended moratorium (on the different
financing available. MSMEs also want tax holidays (17%) and energy support
(16%). Most MSMEs also want opportunities for learning especially through
account for 96% of businesses, 84% of employment and contribute 48% of GDP in
Nigeria, according to the National Bureau of Statistics. Their significant
contribution to the Nigerian economy cannot be taken for granted. Economic
crisis for MSMEs is inevitable. However, how deep and long the downturn will
depend on the workability of measures to assist MSMEs.
survey examines the massive disruptions that are already occurring in the
Nigerian MSME ecosystem and the limited financial resources that these
businesses have to operate. The results underscore the financial fragility of
most MSMEs, and how deeply they are affected by the current crisis. This
underscores the urgency of providing financial palliatives for these businesses
to survive and eventually thrive.
The results also
suggest that the damage to Nigeria’s economy and its network of MSMEs will be
far larger if the crisis lasts for more than a few months as most were caught
unprepared. Although most of the businesses expressed their optimism to remain
in business, however the results also suggest that most businesses may fail if
they are not assisted. Consequently, there is the urgent need to set in place
economic benefits for policies that can safely lead to the reactivation of the
MSMEs. The importance of well-designed and sustainable economic measures for
MSMEs becomes inevitable.
The post-Covid-19 era
will likely bring changes for MSMEs including accelerated digitization of
business operations, greater attention to collaboration and re-thinking of
business models to accommodate emerging opportunities. For many, there will
also be a shift in target sectors of the economy with increased focus on health
and digital industries. MSMEs require deliberate support services to help
manage the post-Covid-19 period.