By Imojime victor and Ikejimba Samuel
In February of 2020, Nigeria announced her index case of the novel Coronavirus, and since then the number of cases have just escalated greatly, as at writing this piece the total number of confirmed COVID-19 cases in Nigeria is six thousand, six hundred and sixty-seven (6,677) as at 19th May, 2020. The pandemic has no doubt caused a lot of unanticipated challenges for countries and the global economy at large.
There is no need to overstate the obvious, the challenges brought by the pandemic are in two major folds, health challenges and economic challenges, the health challenges are glaring, what may not be so glaring are the economic challenges that have come with it.
Due to the sensitivity of the pandemic and the absence of a preventive vaccine and/or cure, a lot of countries have adopted rather drastic measures in combating its (COVID-19) spread. A lot if not all government resources are being channelled towards fighting this pandemic and ensuring survival of the citizens.
Some of the measures taken are restrictions which have been put on movement both within and interstate, there has been an indefinite shutdown of schools, worship houses, entertainment/hospitality businesses and a drastic reduction in the number of economic activities. All these have been done in good faith to protect the lives of Nigerians.
After the index case of the coronavirus in Nigeria, the situation escalated and the Nigerian government swung into action trying to curb the spread of the virus. Already, the Central Bank of Nigeria (CBN) arranged a fiscal stimulus package, including a 50 billion naira ($138.89 million) credit facility to households and small and medium enterprises most affected by the pandemic, a 100 billion naira ($277.78 million) loan to the health sector, and a 1 trillion naira ($2.78 billion) to the manufacturing sector.
Also, all interest rates on all CBN interventions have been revised downwards from 9 to 5 per cent, and a one-year moratorium on CBN intervention facilities has been introduced.
With oil being Nigeria’s major source of foreign exchange, amid the steep decline in oil prices, there is a growing concern about the economic future of the country, with the shutdown and restriction of movement by many countries, it has caused a significant decline in the demand for oil, and Nigeria has been forced to make some serious budgetary adjustments.
In Nigeria, which is Africa’s largest economy, one of the most potent and viable economic contributors is the Small and Medium scale enterprises. The Central Bank of Nigeria defines SMEs as enterprises which have an annual turnover not exceeding five hundred thousand Naira (₦500,000) and relatively few employees.
With the heavy restrictions and partial shutdown on economic activities nationwide, SMEs are the most affected economically, most SMEs operate a ‘work to survive’ approach to business, i.e. they are only sustained by what they generate because majority of them do not have a very strong financial back up like other organizations in the private sector and government parastatals.
Owing to the fact that SMEs create employment opportunities and also contribute a large chunk to the IGR of the country, it is safe to say they are a very important aspect of the Nigerian Economy. It is also true that most SMEs operate on a very small budget, because more often than not they are funded from the personal income of the owner(s).
The economic shutdown has taken a heavy toll on SMEs and other sectors as well, firms/organizations were forced to cut down number of employees and/or wages of employees and many other changes that have negatively affected the lives and economy of Nigerians. Against stringent economic factors and frail or no financial insurance policies, one cannot help but ask; after COVID-19, is there a Possibility of resurgence of SME’s in the Nigerian Economy?
It is okay to prioritize survival, but it is also wise to develop an economic recovery plan because there must be a ‘post-covid’ period, as a matter of it is looming in the very near future.
This piece is not intended to over spell challenges and negativities, it is a ‘heads up’ to the government and other policy makers to take proactive steps in designing an economic recovery plan for SMEs and the country at large, as a matter of priority it is okay to focus on prevention and control of the pandemic, but it will also be a boost to plan for the ‘after-pandemic economic atmosphere’.
It will be wise for the government to consider actions and policies such as;
• Put together a team of experts to draft up an economic recovery blueprint and work towards its achievability
• Initiate and implement more friendly and less stringent policies that will make it easier for SMEs to operate
• The Central Bank should set up a facilities that will boost SMEs recovery such as grants, flexible loans and longer loan moratorium.
• Commercial banks could also develop and deliver financially friendly products to customers that will help boost economic recovery.
• Tax collection should be delayed for SMEs and the worse-hit sectors of the economy in order to enable them recover from the steep decline in demand.
• Partnership; the State should seek out healthy partnerships with Financial Organizations such as African Development Bank (AFDB), so as to achieve its economic recovery goals.
• Take example from leaders in Europe that have already started their post-COVID-19 economic recovery plan.
• The government should endeavor to include SME’s economic recovery plan in the budget for 2021 fiscal year. The Central Bank, commercial banks and other financial institutions should collaborate and generate a pool of resources which could be a trust fund which SME’s can access as grants or loans to help them get back to their feet after the pandemic.
This piece was written to throw a little light on the economic challenge that will face most SMEs after the pandemic, the recommendations made are not finite and exhaustive but rather suggestive and can be improved upon.
SMEs are an integral part of the Nigerian Economy and as such making adequate plans for them will be a huge plus. While our government and policymakers plan an economic recovery plan, it is pertinent that they make significant consideration for SMEs as well.