A fresh perspective on the impact of COVID-19 on MSMEs

by Goke Iyiola

Micro, Small and Medium Enterprises (MSMEs) constitutes the fulcrum of most nations economy, collectively offering the largest pool of employment. MSMEs form the hub of inventions, creativity, innovation, and healthy competition and tend to be nearer to local communities and the grassroots.

According to the Ministry of Industry, Trade and Investment, Nigeria has over 37.07 million micro, small and medium-scale enterprises, MSMEs, and they account for more than 84% of total jobs in the country. The ministry also claimed that the MSME enterprises in Nigeria account for about 48.5% of the gross domestic product, GDP, as well as about 7.27% of goods and services exported out of the country.

Further to the above, MSMEs are also recognised as veritable instruments of poverty reduction and wealth creation; incubator for developing skilled and semi-skilled manpower, entrepreneurial and managerial capacity; as well as being low capital job creation factory. The critical nature of MSMEs to any economy can therefore not be overemphasized.

The COVID-19 pandemic, especially in Nigeria, catalysed a sudden and critical challenge to this sector in such proportions that could be described as constituting an existential threat to the economy. At the onset of the plague, governments ordered the total shut down of all aspect of national life and operations – businesses, government offices, schools … everything, came to a standstill!

TREND

 TOTAL LOCKDOWN

Nigeria is largely a daily trading economy. For most people, if they cannot go out, there is no income. From the street hawkers to artisans – vulcanizers, barbers, grocers, commercial transport operators, restaurateurs, laundry and maintenance technicians; services providers – courier/logistics, hospitality, tourism, consultancy …the list is endless. All were grounded at the initial total lock down stage. It was a nightmare for people to feed. There was no reasonable notice of an impending ‘no movement’ that could have prepared the populace. Only a privileged few had reserve stock to feed on. For the majority not so privileged, the nightmare of not being able to go out and earn income, yet no reserve to live on can best be imagined. Talk of double jeopardy.

PHASED EASING OUT OF LOCK-DOWN

This situation lingered for a few weeks before the government began a phased easing of the lock-down. Except for strictly essential services like fuel stations, everywhere, including banks was still put under lock and key. Food markets were however allowed, albeit with strict regulations and limited hours to open. Dusk to dawn curfew was still in place and the rest of the economy remained shut.

INTERSTATE LOCK-DOWN

Perhaps, one of the biggest blows to the economy was the total restriction of interstate travel by land or air. Experts are still evaluating the impact and the report may take a few months to emerge. There was a drastic cessation of movement of goods, services and supply lines with the attendant scarcity induced inflation.

IMPACT

Many MSMEs were forced to shift from routine operations to crisis management. Stock of perishables and some non-perishables deteriorated under lock and key. There was the headache of not being able to produce/offer their goods and services in most cases, and at the same time contending with wages and overheads. Many had to lay off good and old hands they invested to train. BUSINESSDAY, a leading national business daily, in a report, suggests 30% of MSMEs will not survive the post covid19.

WORKING FROM HOME

Although, there was the attempt at a new normal of working from home, this was fraught with severe challenges like: cost of data, stability of the internet infrastructure, cost of powering computers and other work devices in the face of unstable power supply. And in any case, some businesses cannot just work from home!

AGRICULTURE

A sector of critical note is agriculture. We are still saddled with a largely subsistence farming operations which places the sector firmly within the scope of the MSMEs. A lot of farmers could not go to nurture their crop due to the non-operation of commercial transport occasioned by the sit-at-home order. They also could not go out to get their regular farming inputs like fertilizers, pesticide etc. How this will impact on food security is yet to bee seen.

OTHER LOSERS

Several other high employing sectors which MSMEs offers support services to, were also deeply affected among which are: construction, entertainment, promotional products, commercial transport, travel, leisure and banking.

 

GAINERS

REPAIR AND MAINTENANCE TECHNICIANS

All is not doom and gloom though especially from the gradual ease of lock-down.

Among the main gainers are the repair and maintenance technicians – Power-generating sets, refrigeration systems, plumbers etc. Their businesses have been largely unaffected. On the contrary, families’, spending more time at home, has put more pressure on home and household appliances, increasing the demand for repairs and maintenance services.

E-COMMERCE COMMUNITY AND IT PLATFORMS

Another major gainer during this pandemic is the e-commerce community. Given the demand for social distancing and restricted movement, a lot of transactions have gone online. It is now not unusual to shop, even for meals and grocery online. Movies, entertainment, and gaming online is at an all time high with the attendant windfall for Information Technology and Financial Technology platforms.

DELIVERY/COURIER SERVICES

Various service businesses are also cashing out, primary of which is the delivery/courier/logistics sector. Their motorcycles and minibuses can be seen doting the streets of Lagos and other major cities of Nigeria making deliveries.

DIGITAL MARKETING

The digital marketing industry is equally enjoying more patronage as many business owners are forced review their market engagement strategy since it has become imperative to expand from their traditional market to a wider national and global target market.

ADVERTISING

The battle against covid-19 was prosecuted largely on two fronts. First is the practice of social distancing and public hygiene, which was vigorously promoted on every possible media locally and globally for public enlightenment. Traditional and online media recorded a sharp increase in advertising revenue from government, non-governmental agencies and other entities that drove an aggressive and relentless campaign.

HEALTH CARE PRODUCTS & PHARMACEUTICALS

The other was preventive and when necessary diagnostic and therapeutic healthcare practice. The use of surgical facemasks, hand sanitizers, disinfectants and the likes became not just required but mandatory by official directives. In the absence of an acceptable vaccine, the suggestions that certain drugs like: hydroxychloroquine, azithromycin, Zinc sulphate and vitamin C were useful in treating covid-19 patients; resulted in a massive boom for pharmacies and health care products manufacturers and retailers. Prices of such items and drugs skyrocketed between 100 – 1000%, yet they ran out of stock daily from the barrage of the horde of anxious buyers.

CONCLUSION

Most African nations are still predominantly a consumer nation. Industrialization and our production capacity are still far below par. It is therefore logical that other nations will want to take satisfy local demand before considering export. This is likely to impact on the import/export business, especially the intra-national value chain, spanning clearing agents, warehousing, wholesalers, distributors and retailers. Already in Nigeria, there is increased pressure on the Naira from foreign exchange trade, coupled with unimpressive crude oil prices. Some analysts are already projecting an imminent recession from Q3 (third quarter).

MSMEs are clearly in dire straits, and now comprehensively compounded by the ravaging Covid-19. The little gains of the past appear to be ebbing while the enormous journey ahead remains daunting. However, the situation in my view also presents the stage for the reset and re-invention of the economy through a well-coordinated and strategic alliance between the government, the finance/credit sector and the MSMEs. The various pre and post covid-19 policy response of government must be backed by a demonstration of resolute political will and extensive public enlightenment.

MSMEs must review their business and sustainability plans with a view to drawing up a practical strategic roadmap that can answer to the moment and going forward. Resilience, innovation and creativity, which constitute the soul of entrepreneurship, are needed now more than ever.

Certainly, things will never be the same again but then it is said that change is the only constant thing in life. It is also said that: “Necessity is the mother of invention.” May this challenge help us to find new strength, new ways and new wisdom to win, to prosper and gain relevance in the new normal.


Iyiola is COO, 7Edge LLC

Leave a reply

Your email address will not be published.

cool good eh love2 cute confused notgood numb disgusting fail