In spite of the COVID-19 pandemic which slowed economic activities in Nigeria, the number of business owners in Africa’s largest economy increased by 5.4 million between 2019 and 2020, according to data from EFINA’S 2020 survey on Access to Financial Services in Nigeria.
The result of the survey put Nigeria’s business owners at about 46.4 million, a growth of 13.17 percent when compared to the 41 million reported in 2018.
“The growth in business owners may indicate the resilience of Nigerians in dealing with the pandemics economic challenges,” Ashley Immanuel, CEO of EFINA, said.
According to her, the growth in adults running their businesses in Nigeria maybe as a result of the 7.4 million adults that got retrenched in 2020 due to the COVID-19 pandemic.
While about 86 million (80%) adults’ livelihoods were negatively affected by the pandemic, EFINA’S data revealed that 7.8 million of the affected population were retrenched as 24 million stopped working for some time, 39 million settled for reduced income, and 24 million could not operate due to restrictions.
Hit by the double challenge of COVID-19 and slow economic growth, small businesses in Africa’s most populous nation were more vulnerable in 2020 as constraints in liquidity and cash flow coupled with increased payments delays resulted in endemic depletion of working capital.
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Micro, small and medium enterprises (MSMES) can power a stronger recovery from the COVID-19 pandemic, due to their innovative and opportunity-seeking nature, but they need more support, according to participants at the 7th edition of the Empretec Global Summit held in April 2021.
Such support should be aligned with the priorities of the POST-COVID-19 social and economic recovery, said UNCTAD Acting Secretary-general Isabelle Durant.
“Short-term support measures such as relieving tax burdens on MSMES, extending debt finance and employment support are certainly needed and should be continued,” Durant said. “Yet at the same time, it’s important to invest in long-term structural policies, such as digital and financial inclusion, as well as entrepreneurial skills capacity development,” she added.
The smaller size of Micro, small and medium enterprises (MSMES) allows them to be flexible and adapt to new environments such as the one created by COVID-19.
Not only can they help overcome previous constraints related to lack of productive capacities and economic diversification in many low-income countries but also enhance a strong and sustainable recovery, analysts said.
MSMES constitute the backbone of the the global economy, accounting for twothirds of employment globally and between 80percent and 90percent of employment in low-income countries like Nigeria. At the same time, they are disproportionately affected by pandemic-related shocks. They are overrepresented in non-essential services sectors hardest hit by confinement measures. Many MSMES have suffered huge revenue losses while others have shut down.
A breakdown of EFINA’S data showed that Nigerian businesses operating in the formal sector were down by 1 percentage point to 7 percent in 2020 from the 8 percent reported in 2018.
Other businesses that are non-farming were also down but by a marginal 0.4 percentage points from 16.7 percent in 2018 to 16.3 percent in 2020. Those that rely on farming were down 3.21 percentage points. They dropped from their 2018 record of 23.4 percent to 20.3 percent in 2020. Those whose businesses are in the farming sector declined by 0.2 percentage points to 11.5 percent in 2020 from 11.2 percent.
Further breakdown of EFIna’s data showed that financial inclusion which can benefit individuals, families, and businesses, supporting key outcomes such as GDP growth has not made impactful progress in Africa’s largest economy.
With a tepid 0.9 percent growth, Nigeria’s financial inclusion rate improved to 64.1 percent in 2020 from 63.2 percent in 2018. This means that its financial exclusion rate slowed marginally from 36.8 percent in 2018 to 35.9 percent in 2020.
However, the excluded adult population of 38.1 million reported in 2020 was higher than the 36.6 million recorded in 2018, meaning 1.5 million adults fell into the exclusion circle in the last two years to 2020.
Financial inclusion means that people have access to basic financial services like a savings account, credit and insurance. A higher exclusion rate in Nigeria could lead to a poorer population as lack of access to credit and insurance puts them at an economic disadvantage.
For the first time, the EFINA Access to Financial Services in Nigeria 2020 Survey measured the financial health of Nigerian adults, finding that only 26 percent of Nigerian adults are considered financially healthy, while 44 percent are financially coping and 30percent are financially vulnerable.
