Impact of Covid-19 on Micro, Small and Medium-sized Enterprises in Nigeria


How 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.


The 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.

The Survey

The 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 Findings

With 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.

Income level

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 etc.

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.


Business Survival Rate

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 the negative.

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.

Areas 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 persists.

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 and patronage.

Measures to cushion effect of Covid-19

Expectedly, funding 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 e-learning.

Support type


MSMEs 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.


The 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.


Posted by Lola Falokun

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