COVID-19 AND THE MICRO, SMALL AND MEDIUM ENTERPRISES (MSME): THE NEED FOR REGIONAL EASE OF LOCKDOWN-
Esther Thontteh is a lecturer in the Department of Estate Management at the University of Lagos and is the Cluster Manager for the ARUA Land Management and Administration cluster
The figures published by John Hopkins University on Sunday 10th May, 2020 show that 4,044,198 coronavirus cases have been detected worldwide, with 279,609 deaths and 1,382,428 people now recovered. In Nigeria alone 4,151 cases and 128 deaths have been recorded according to the Nigeria Centre for Disease Control- NCDC. The nature of the virus has forced countries to shut down businesses, an estimated 94 percent of businesses in Nigeria (KPMG, 2020). Micro, Small and Medium Enterprises make up about 70 percent of the businesses in Nigeria, and are the most vulnerable to the economic shocks occasioned by COVID19. Incidentally, Lagos, Ogun and Abuja which are the major economic hubs of Nigeria were the most affected as they have been under a total lockdown since Marcy 2020.
Nigeria is a Federal Republic comprising 36 States and its Federal Capital Territory, Abuja. The states are grouped into six geopolitical zones, the North Central (NC), North East (NE), North West (NW), South West (SW), South East (SE) and South South (SS). Traditionally, there is a form of homogeneity within these zones as socio-cultural and economic interactions are strong. The map belows shows that the pandemic has spread across the entire country. The pandemic has also been declared ‘a global war’ and is overwhelming on some states in terms of resources and man power. This therefore, requires a concerted effort and pooling of resources to curtain the pandemic – or flatten the curve as is said with regards to COVID19.
Map showing the geographical boundaries of States in Nigeria.
Credits: Dr Mayowa Fasona, UNILAG COVID-19 Advisory Group
Despite the strong virulence of the disease, the Federal Government announced the guidelines for gradual easing of the lock down from May 4th 2020. However, inter-state travel remained restricted. This has had an adverse effect on states especially Lagos is the economic hub of the nation. It cannot be overemphasized that whatever affects Lagos will have ripple effects across the entire country, starting from the adjoining states. In Lagos, the high rate of urbanization has resulted in the growth of the peri-urban interface to the point where these physical boundaries between Lagos and Ogun are indistinguishable.
This inter-state ban is critically affecting the MSME – especially those located in the South Western zone, due to their nature of business and dependence on Lagos State for economic survival. For instance, about 40% of the work force in Ogun State have their businesses in Lagos. Again, most of the MSMEs in Ibadan (Oyo State) who deal in groceries buy over 70% of their stocks in Lagos.
Prior to the interstate lockdown, both essential and non-essential goods are mostly purchased and transported from Lagos to other parts of the country. An MSME business owner who ordinarily comes to Lagos through road transportation for product purchases and business survival is restricted. Although, government announced the ease of passage for essential goods across the states of the federation but an MSME who does not have a personal means of transportation and depends on public mode of transportation cannot move, especially since inter-state motorparks are closed. Furthermore, the issue of restricting inter-state movement of persons and non-essential products such as building materials, cosmetics, textile merchandising, stationaries and so on has also negatively affected service provision and may result into job loss if the interstate lockdown persists. For instance, shop attendants, sales personnel, home delivery services and after sales service personnel may not be recalled by their employers as a result of business shocks and remodeling strategies to trim down recurrent expenditures.
The direct implications can be stated as follows
· Transportation restriction: This has limited the transportation of goods with short life span (expiry dates) resulting into products been non-useful or no longer fit for consumption. This will result in both capital and profit loss and eventual business collapse
· The burden of loan repayment: While businesses are on lockdown, interest on loan and capital repayment are not. Therefore, having a negative effect on entrepreneur’s capital. This will result in business duress and foreclosure
· Tax burdens: An entrepreneur sometimes pays as much as five different taxes depending on the type of business and location such as Value Added Tax-VAT, local government permit, income tax, consumption tax e.t.c . This will result in high cost of doing business for MSME
· Space rental: In Nigeria, commercial spaces such as shops and office space are let out on annual basis. This means that when the spaces are closed the unexpired lease term are wasting away, this will invariably increase the cost of doing business for the entrepreneur.
I believe that easing of lock down, and allowing inter-regional movement will be beneficial to the Economy and will help the states within the region pull together and share the socio-economic risks that have arisen due to the pandemic. This implies that people will only be allowed to move within their geo-political regions only. For instance, the Southwest can move around within the region and will not be allowed to cross to other regions and vice versa. I therefore submit that without regional easing of lockdown, life may be more difficult for the micro, small and medium-sized enterprises with attendant unfavorable inflation hitting the commodity markets and gradual job loss. In ensuring positive outcome of regional easing of the lockdown, the business owners will need to adopt all the measures stipulated by the World Health Organization to flatten the curve of the COVID-19 in the course of daily running of businesses.
Some specific MSME business relief actions are
· Transportation: Easing of inter-state transportation lockdown for movement of goods and services
· Loan repayment: There should be moratorium on loan repayment for the next six months depending on the longevity of the pandemic and lockdown. This also implies that interest rates will not be calculated over this period.
· Tax burdens: Government should waive tax payment completely for six months minimum for the affected businesses
· Space rental: Landlords should forgive totally at least three months’ rent or as the case maybe to help cushion the effect of shocks on MSMEs.
In summary, in Nigeria is to recover from the COVID19 pandemic without severe negative economic impacts on most of her citizens, it is important that MSMEs are protected from business harm or duress and compensated for the pandemic shocks experienced.
Johns Hopkins University, (2020). COVID-19 Map - Johns Hopkins Coronavirus Resource Center, https://coronavirus.jhu.edu/map.html
KPMG (2020). COVID-19: A Business Impact Series - KPMG Nigeria, https://home.kpmg/ng/en/home/insights/2020/04/covid-19--a-business-impact-series.html
WHO (2020). Getting your workplace ready for COVID-19: How COVID-19 spreads, https://www.who.int/who-documents-detail/getting-your-workplace-ready-for-covid-19-how-covid-19-spreads