Businesses in Nigeria are counting their losses from a five-week lockdown imposed to curb the spread of coronavirus in Africa’s most populous country, according to separate reports by the Lagos Chamber of Commerce and Industry (LCCI) and the Enterprise Development Centre of the Pan-Atlantic University.
The lockdown has also forced small businesses to rethink their business models in order to stay afloat as the business environment toughens.
The Federal Government imposed a five-week lockdown in Lagos, Abuja and Ogun State, from March 30 to May 4, to curtail the spread of coronavirus in the country. Gradual ease of the lockdown has begun, but businesses have not fully reopened as several restrictions remain in place.
Though the lockdown was targeted at ensuring the safety of Nigerians, it has done a lot of harm on businesses.
In a survey carried out by the LCCI, 64 percent of respondents (mainly business leaders and owners) said they lost below N500,000 each day during the lockdown, while 16 percent lost between N500,000 and N1 million. Similarly, 12 percent lost above N5 million each day, while 7 percent incurred between N2 million and N4 million loss daily during the period.
Nigeria has 41.5 million MSMEs and thousands of large enterprises, meaning that these losses run into billions of naira. Lagos has 8.395 million MSMEs, according to data from the National Bureau of Statistics (NBS) and the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), with thousands of large enterprises.
The LCCI found that 63 percent of respondents planned to downsize operations to minimise losses, while 18 percent were willing to cut capital spending.
“This is unsurprising as businesses have not generated income over a five-week period and have lost trillions of naira in profit due to lockdown,” LCCI said in a report breakdown signed by Muda Yusuf, its director-general.
“This suggests that unemployment rate is expected to increase drastically post-lockdown except government takes urgent steps to support business owners towards surviving and ensuring business continuity,” it said.
The chamber said such cost-cutting measures might see unemployment rate surge to 40-45 percent by end of 2020, from 23.1 percent as of the third quarter of 2018.
“This has ripple effect on the Gross Domestic Product given that private consumption by households accounts for about 60 percent of national output,” LCCI said.
Nigeria is world’s poverty capital with over 80 million people living in extreme poverty. Nigerians are the second most miserable people in Africa after South Africans, according to the 2019 Hanke’s Index. With coronavirus-induced lockdown, many will be out of job, which will further balloon the already congested labour market and fuel higher crime rate.
Most of the respondents (41 percent) in the LCCI survey requested reduction in interest on loans, while 29 percent wanted tax waivers; 17 percent canvassed import/demurrage waivers as 13 percent called for extension on loan repayment.
Respondents were from various sectors, including energy and agriculture.
The chamber called for substitution of debts with equity, urging the government to redesign or develop national policy to protect jobs and income.
Similarly, a survey on the impact of COVID-19 on MSMEs by the Enterprise Development Centre (EDC) of the Pan-Atlantic University shows that 93 percent of small businesses reported decline in revenue within the period while 89 percent admitted having issues in their supply chains.
“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.
Due to the influence of technology during the lockdown, 88 percent of MSME owner-respondents said they would tinker with their business models, with 47 percent likely to consider new businesses due to the harsh realities of COVID-19 pandemic.
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 financially fragile,” EDC said. “Some MSMEs report that they only have cash to cover for a short period of time.”
More than 55 percent said they 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 collaborate and partner with each other as some of them offer price cuts and promotion, the survey shows.
However, the majority of MSMEs (83 percent) believed that their business would survive the pandemic and they would bounce back, the EDC report said. It said MSMEs require deliberate support services to manage the post-COVID-19 period.
