BusinessDay
Nigeria's leading finance and market intelligence news report.

Lockdown weighs on SMEs as margins fall on inter-state restrictions

....75% need funding to

Measures taken to curb the spread of coronavirus may be timely and inevitable, but they are also hurting small businesses struggling to find their feet in a regressing economy.

The Federal Government had imposed a five-week lockdown in Lagos and Ogun states as well as Abuja to make contact tracing and management of Covid-19 patients easy for health workers. There is still a partial lockdown in some states while Lagos, Ogun and Abuja are yet to fully re-open owing to rising number of cases.

In a survey done by the Enterprise Development Centre of Pan-Atlantic University, Lagos, on the impact of Covid-19 on MSMEs, 93 percent of small businesses reported decline in revenue while 89 percent admitted having issues in their supply chains due to restrictions on inter-state movement.

Forty-nine percent of the respondents said they were facing crippling logistics issues as 88 percent said they would change their business models.

“Most of them reported that they were unable to move their raw materials needed for production or transport their goods due to the restrictions of movement for both human and goods,” EDC said in the report.

Due to the influence of technology during the lockdown, 47 percent would likely consider new businesses due to the harsh realities of Covid-19 pandemic while 25 percent would cut output.

Fifty-seven percent reported that their sales had been affected, just as 52 percent had issues with cash flow, according to the survey.

“The results suggest that many businesses are financial fragile,” EDC said.

“Some MSMEs report that they only have cash to cover for a short period of time,” EDC further said.

More than 55 percent are considering laying off employees, while 44 percent who are reluctant to lay off workers, would consider salary cuts.

MSMEs now see more need to collaboarate and partner with each other as some of them now offer price cuts and promotion, the survey shows.

Most of the respondents (75 percent) would want funding support, while 35 percent required technology support and access to market. Twenty-nine percent needed mentorship as 22 percent and 17 percent wanted reduced interest rate and tax holiday respectively.

However, the majority of MSMEs (83 percent) believed that their business would survive the pandemic and they would bounce back, the EDC report says.

The EDC said MSMEs required deliberate support services to manage the post-Covid-19 period.

The 41.5 million MSMEs in Nigeria are facing challenges caused by preventive measures against the deadly Covid-19, which has killed over 300,000 people globally and more than 200 in Nigeria.

In an interview with Start-Up Digest, Olamide Ayeni-Babajide, chief executive of Pearl Recycling, a Lagos-based company that transforms solid wastes into chairs, said she had orders for the supply 300 chairs across the Nigerian states since the Lagos lockdown but could not supply due to restrictions on inter-state movements.

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