THE IMPACT OF COVID-19 ON SMALL AND MEDIUM ENTERPRISES IN LAGOS STATE
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THE IMPACT OF COVID-19 ON SMALL AND MEDIUM ENTERPRISES IN LAGOS STATE
1.1 Background of the study
The Covid-19 Pandemic has been one of the most affecting events in recent history. It spread to more than 216 countries and territories around the world and caused the most economic decline since the Great Depression (World Health Organisation, 2020; International Monetary Fund, 2020). In December 2019, Covid-19 was first detected in Wuhan , China and caused colossal death and spread to almost every corner of the world (Akanni and Gabriel, 2020). The first Covid-19 case was detected on 27 February 2020 in Nigeria. According to WHO (2020), as of July 28, 2020, 1 pm (GMT+1), the total number of confirmed cases worldwide was 16,301,736, while confirmed deaths were 650,069 in 216 countries , regions, or territories worldwide. The Nigerian Center for Disease Control (NCDC) reported 41,804 cases, 18,704 patients discharged and 868 deaths as of July 28, 2020, and the number of tests in Nigeria was 267,842 (in a population of about 200 million people). No company was likely to have planned for COVID-19, no matter the size of the company. Public Health Literature has advised business owners to always make preparations for this sort of emergency, but in the real sense only large corporations have ever formalized plans (Rebmann, Wang, Swick, Reddick and Delrosano 2013). From early spring 1918 till late spring 1919 (Turner and Akinremi, 2020), the 1918 pandemic killed about 40 m people worldwide. Goldman Sachs economists predicted that the U.S. is expected to have a gross domestic decline of 3.8 per cent due to the virus by 2020 (Hatzius, Phillips, Mericle, Hill, Struyven, Choi, Briggs, Taylor and Walker, 2020).
Igwe (2020) indicated that due to the Covid-19 outbreak, the global economy is facing the worstever economic recession. The world economy is supposed to account for economic losses across three channels of transmission: supply chain, demand and the financial market. These networks would have a negative effect on companies, customer households and foreign trade. Covid-19 Pandemic has put pressure on policymakers and supervisory institutions worldwide, setting off a range of government agencies’ mitigating measures to address possible negative socio-economic impacts on households and businesses (KPMG, 2020). A pandemic is impacting supply as well as demand (Swift 2009). The most negative of the Covid-19 pandemic would affect all businesses, some positively. The pandemic is still ongoing, but forecasting its long-term economic, behavioral, or social implications is not simple as this factor has not been done with previous pandemics (Donthum, and Gustafsson, 2020). As customers remain at home and markets are shut down (Tucker, 2020), the COVID-19 epidemic is likely to trigger bankruptcy for many well-known brands in many industries. Covid-19 ‘s effect on the global economy is possibly unparalleled since the Great Depression of the 1930’s (Euronews, 2020). Covid-19’s short-term effect is felt instantly and seamlessly due to the widespread global lockout and social isolation steps (He and Harris, 2020).
SMEs play a critical role in social inclusion, rural innovation and local job development (Auzzir et al . , 2018). In times of crisis, SMEs suffer the most and are the least organized among all organisations. The business continuity plans are also missing for SMEs. Having good business continuity plans during a pandemic will help reduce any negative effects on business (Turner and Akinremi, 2020). Covid19 created serious challenges for SMEs around the globe. The adverse effects include interruptions of supply chains, cash flow problems, weaker demand for imported goods and services, inability to meet delivery dates, and increased risk aversion in financial markets. (OECD, 2020). SMEs are vital to the smooth functioning of any economy by ensuring that goods are delivered during and after public emergencies (Burton, Confield, Gasner, and Weisfuse, 2011). The Nigerian economy has suffered catastrophic consequences as a result of Covid-19; this includes a sharp drop in oil prices, borrowers being unable to access service loans, disruption of the global supply chain, declining revenue and also the pullout of Nigerian stock market investors’ funds (Ozili, 2020).
1.2 Statement of the problem
The Covid-19 pandemic outbreak has shut down a great deal of business , leading to massive trade and trade disruption in many industrial sectors. Retailers and brands face numerous short-term employees, health and safety problems, cash flow, supply chain, consumer demand, sales , and marketing concerns. There are no more many markets, especially in hospitality and tourism, while online shopping, online communication and online entertainment have seen exponential growth (Donthum, and Gustafsson, 2020). However, Lagos State was mostly affected. If Lagos state were to be a country in Africa, it would be the 5th largest economy in Africa. Lagos is tagged as the economic capital of Nigeria (Idowu, 2020). As of July 28, 2020, Lagos state has a total of 14,848 cases out of 41,804 cases in Nigeria. (NCDC). This is about 36% of the number of cases in Nigeria. It’s against this background that this study intend to determine the impact of covid-19 on small and medium enterprises in Lagos state.
1.3 Objective of the study
The general objective of this study is to examine the impact of covid19 on small and medium enterprises in lagos state, with the following specific objectives of the study:
- To examine the impact of covid19 on SMEs in Lagos State
- To examine the financial problems of SMEs during the covid19 outbreak in Lagos State
- To examine SMEs’ preferences on government assistance in Lagos State
- To determine the relationship between SMEs characteristics and negative impact
1.4 Research questions
- What is the impact of covid19 on SMEs in Lagos State?
- What is the financial problems of SMEs during the covid19 outbreak in Lagos State?
- What is the SMEs’ preferences on government assistance in Lagos State?
- What is the relationship between SMEs characteristics and negative impact?
1.5 Significance of the study
This study will be of benefit to the business owners on the survival strategies for SMEs during and after covid-19 in Lagos. The study will also expose SME managers and owners to ensure they adopt the information technology uses, services, and infrastructure in their business as SMEs need to consider digitalization such as digital marketing through social media is like marketing products and services without a boarder. The study would fill the research gap in knowledge by adding to established literature and education, and the researchers will use this study as a reference material to develop and improve their work.
The study is based on the mpact of covid19 on small and medium enterprises. However, the location of study is Lagos State, where SMEs were mostly affected.