Full Project – Covid-19 pandemic and the performance of selected small and medium scale enterprise

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CHAPTER ONE: INTRODUCTION

• Background to the Study

The COVID-19 pandemic crisis, revealed at the beginning of 2019, has already become a permanent part of the 21st century world history. Its consequences, reported for two years now, indicate a clear economic downturn, and its progression, dynamics, and global character prove the occurrence of the domino effect related to people’s migrations and the spread of the virus, which has infected not only human bodies but also whole economies, including, in particular, some service industries. In spite of quite strong global links, businesses react differently to similar threats related to the crisis, and, more broadly, to those arising from changes in their environment. Therefore, it can be pointed out that there are better and worse ways of responding to external threats, which differentiate the situation of enterprises and their competitive advantage in the period of intense turbulence in the environment Babbage (2021).

The emergence of COVID-19 pandemic brought about changes worldwide including Nigeria. The changes are summarized as: increased sickness, death, poverty, effect on health, food production, security, money supply, reduced inflow of foreign exchange resulting from lack of export and import of goods and services except for essential products, lack of patronage resulting from restrictions in movement and access, changes in mode of business operation from physical contact to online and many others. The SMEs suffered and are still being affected by the emergence of the pandemic since year 2020. Patronage and cash flow of the SMEs evaluated was seriously impacted by the novel virus plaguing the world economy. This experience triggered negative survival, excitement and sentiment on the continuous infection of this pandemic. Businesses have collapsed and many more are on the verge of extinction due to prevalence of COVID-19 pandemic. Hence, most SMEs with insufficient capital outlay went into economic shock and it is highly unlikely to recover from this shock in the short run.

The various hardship caused by this novel virus informed many countries in the world to enforce containment measures which led to the restrictions on movements nationally and internationally, total lock down and closure of business activities, border to border movement restrictions among others.

As SMEs are vital to economic growth and also contribute to the development of the world economy generally and specifically in developing economies, the SMEs play major role in economic development as employers of labour. Abosede & Onakoya, 2013; Aderemi et al. (2020) summarized that, the SMEs in Nigeria play pivotal role in the economic development resulting from their capacity to stimulate welfare of the people, reduction of unemployment and productivity. Bloom et al. (2001) indicated that health is a key player and a driving force that brings prosperity through economic growth and development. Therefore, absence of good health system and a healthy business environment, business activities cannot thrive successfully. Bloom et al. (2001) earlier noted that pandemics pose negative impacts on economic performance, through poor health.

The prevalence of COVID-19 has instigated various researches in economics, health, environment, manufacturing, agriculture and many more. It is expected that these research work will postulate possible coping strategies or mechanisms and guidelines that will mitigate against future effect of pandemic on SMEs and world economy.

Brounen and Derwall (2010); Hon, Strauss and Yong (2004); Karolyi (2006) likened the effects of pandemics to terrorist attack, which inhibit trade and business activities within affected areas, and has the capacity to lower productivity. Srivastava & Agarwal (2020) indicated that the pandemic has posed the greatest impact on stock markets around the globe, and has caused worst economic meltdown since the 2008 global financial crisis. In recent times, Goodell (2020) agrees that natural disasters and terrorist attacks are similar to the effects of COVID-19 on economic performance, because it inhibits trade and production within places affected. Financial Times (2020) attests to this, noting that the emergence of COVID-19 has created panic in the financial system, causing high volatility in several markets. Akhtaruzzaman et al. (2020) affirms by stressing that many financial and non-financial firms across the globe have been adversely affected by the COVID-19 pandemic, as stock returns are trending downwards these days. Busari and Jaiyeoba (2021) noted that even if the pandemic is resolved, its effects on business and economic performance will linger in the short run.

This study is interrogated by the researcher to elicit government sensitivity in ensuring medium- and long-term planning in health sector are made and reviewed periodically so that whenever SMEs are confronted with pandemics or shock of this nature in the future, they will be able to surmount it and avoid any possible future economic shock. Despite this global effect on the finances of SMEs, the following businesses experienced boom; Telecommunication, Medicaments and medical equipment, businesses involved in the production and supply of essential products, fumigation, decontamination and defogging service providers.

• Statement of the Problems

There are many infectious diseases in the history of the world, but the COVID-19 has proven to be highly infectious, viral and contagious. The effect of this infection on human life is highly unprecedented. This has led to many operators of SMEs to close down business operation, social distancing, and also total compliance to lockdown directives by the Federal Government of Nigeria. The effect of this containment measures also led to a negative effect on the cashflow, supplies, revenue, and lack of patronage on SMEs businesses generally and specifically in Abuja, Nigeria. In addition, the containment measures such as; total lock down, restrictions on movement affected production level, reduced sales, reduced revenue, caused cash trap, hunger, illness, death, unemployment, poverty among others. These challenges hampered the performance of SMEs in the world at large and specifically on SMEs performance in Abuja since prevalence of COVID-19 pandemic. The effect of these on SMEs spurred many researchers to commence in-depth study into identifying and defining coping strategies and measures that policy makers, institution and many other stakeholders can adopt in order to avoid similar effect in the future.

The following authors made meaningful contributions into effect of COVID-19 Pandemic on SMEs business performance in Nigeria. They are: Aderemi et al. (2020)—“the Impact of Corona Virus (COVID-19) Pandemic on Small and Medium Scale Enterprises (SMEs) in Nigeria”, Akingbade (2021)—“the challenges of COVID-19 pandemic on Micro, Small and Medium Scale Enterprises in Nigeria”, Otache (2020)—“the effects of Covid-19 Pandemic on Nigeria’s economy and possible coping strategies”, and Oyewale et al. (2020) also provided insight in “ Estimating the impact of COVID-19 pandemic on Small and Medium Scale Enterprises: Evidence from Nigeria”.

In the publication of UNDP, 2020, it was reported that many businesses and countries in the world are facing severe financial and economic crises resulting from the prevalence of Covid-19 Pandemic.

As proclaimed by Albert Einstein: “Amid every crisis lies great opportunity” for managers, the Covid-19 crisis creates an opportunity to foster transiliency and thus better cope with the next Pandemic (Craighead et al., 2020).

• Research Question

The following research questions were raised in line of the statement of the problem and research objectives.

• To what extent has lock down affect financial performance of Small and Medium Enterprises in Ofu Local Government Area?
• To what extent has COVID-19 infection affected financial performance of Small and Medium Enterprises in Ofu Local Government Area?
• How can the coping strategies ameliorate financial performance of Small and Medium Enterprises in Ofu Local Government Area?
  • Objectives of the Study

The key objective of the study is to examine the effect of COVID-19 pandemic on the performance of SMEs in Abuja. The specific objectives are:

• To highlight the effect of lock down on the financial performance of Small and Medium Enterprises in Ofu Local Government Area.
• To determine the effect of COVID-19 infection on the financial performance of Small and Medium Enterprises in Ofu Local Government Area.
• To determine the coping strategies for the financial performance of Small and Medium Enterprises in Ofu Local Government Area.

• Statement of Hypotheses

The following alternative and null hypotheses were raised in line with the research questions and hypotheses to guide the study.

• H_i1: There is significant relationship between lock down and financial performance of Small and Medium Enterprises in Ofu Local Government Area.

H₀₁: There is no significant relationship between lock down and financial performance of Small and Medium Enterprises in Ofu Local Government Area.

• H_i2: There is significant relationship between COVID-19 infection and financial performance of Small and Medium Enterprises in Ofu Local Government Area

H₀₂: There is no significant relationship between COVID-19 infection and financial performance of Small and Medium Enterprises in Ofu Local Government Area.

• H_i3: The coping strategy has effect on financial performance of Small and Medium Enterprises in Ofu Local Government Area.

H₀₃: The coping strategy has no effect on financial performance of Small and Medium Enterprises in Ofu Local Government Area.

• Significance of the Study

The study will be of great significance to students in Federal Polytechnic Idah especially School of management Study in both policy makers and SMEs in general. Specifically,

• To the policy makers, it would provide the basis for effective policies for the sector’s survival of the covid-19 challenges and also adopt strategies to mitigate likely future occurrence.
• To the Small and Medium Enterprises, it would provide an opportunity for diversification, business opportunities and coping strategies now and in the near future.

• Scope of the study

This study shall cover the Covid -19 pandemic and the performance of selected small and medium scale enterprise in Ofu Local Government Area.

• Operation Definition of key Terms

Covid – 19: is an infectious disease caused by the SARS-CoV-2 virus. Most people infected with the virus will experience mild to moderate respiratory illness and recover without requiring special treatment.

Enterprise: is a company or business, often a small one.

Pandemic: is a disease outbreak that spreads across countries or continents. It affects more people and takes more lives than an epidemic.

Performance: the act of doing something, such as your job: If the accident happened during the performance of his regular duties, he’s covered by disability insurance.

Small enterprise: a small-sized enterprise as a company with fewer than 50 employees

Government: is the system or group of people governing an organized community, generally a state. In the case of its broad associative definition, government normally consists of legislature, executive, and judiciary.

Medium enterprise: consist of enterprises which employ less than 250 persons and either have an annual turnover

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Full Project – Covid-19 pandemic and the performance of selected small and medium scale enterprise