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The Impact of COVID-19 on Business Enterprises in Nigeria

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It is now over a year since the coronavirus outbreak was declared a global pandemic by the World Health Organization. COVID-19 has claimed over 4 million lives and infected over 200 million people worldwide.

The pandemic’s impact has touched almost every aspect of modern life, upending public health systems, the global economy, travel, supply chains, community and social ties and how we work. Unemployment has risen, and the global economy shrank by 4.4% in 2020, according to International Monetary Fund (IMF) estimates. The vast majority of nations around the world entered into recessions, having experienced negative GDP growth.

Developing countries have suffered disproportionately due to the socio-economic fallout from the pandemic. Wealthier nations can afford to institute the crippling lockdowns and restrictions necessary at times to arrest the spread of the virus, and to support their populations so they can stay at home in an effort to limit community spread. Many developing countries however were often forced to rely on a mishmash of truncated measures to limit the fallout on populations already living in poverty or who rely on daily work for subsistence.

In addition, while wealthier countries have the resources to pre-order large quantities of vaccine candidates and ramp up inoculations in order to help their countries overcome the challenges of the pandemic, poorer countries have to wait in line to vaccinate their populations, relying on mechanisms like COVAX which have the capacity only to vaccinate a percentage of the populace.

The pandemic had an outsized socio-economic impact on Nigeria, which has one of the highest rates of multidimensionally poor individuals in the world. The economy had already suffered due to a rapid decline in oil prices in recent years and security challenges stemming from insurgent violence and competition for resources, and the fallout from the pandemic plunged the Nigerian economy back into a recession – its deepest in over four decades with real GDP contracting for two consecutive quarters by 6.1 percent and 3.6 percent in Q2 and Q3 of 2020, respectively. The impact, however, has been uneven across economic sectors, with some enterprises feeling the adverse economic effects more so than others.

This bird’s eye view, however, offers an aggregate of the overall increase in suffering, poverty, unemployment and business closures prompted by this public health crisis. It obscures the dynamics and developments that together give rise to the aggregate picture. In order to gain a better understanding of these effects at a granular level, UNDP in collaboration with the National Bureau of Statistics has built a comprehensive database of the business environment in Nigeria, offering an unprecedented close-up of the situation in the country and a detailed assessment of the impact of the pandemic on businesses and business owners.

The results of the survey detail the ramifications of the COVID-19 pandemic. Disruption in operations was evident across enterprises with at least two thirds of businesses currently operating in the country having had to close down during the pandemic. The results also shed light on resistance to lockdown directives and regulation by the government, particularly among informal enterprises where a third continued to operate throughout the pandemic. Around one in ten businesses were still closed at the time of the survey.

It is however likely that many businesses were unable to withstand the shock of the pandemic. As many as one in three enterprises interviewed reported knowing of an enterprise similar to theirs that permanently closed due to operational challenges brought about by the pandemic.

A drop in production, sales and revenues was commonly experienced by enterprises across the country, albeit to varying degrees. Median losses in revenue stood at 44 percent relative to revenues in 2019. Meanwhile, the utilities and agriculture sectors emerged as relatively less impacted and some enterprises even reported gains compared to those in the transport and mining and quarrying sectors, for instance. Even after an eventual easing of the restrictions on movement and containment measures, the impact of the pandemic continued to linger with sales and revenues still contracting for 74 percent of the enterprises.

The survey also elucidates the dynamics behind the increase in the national unemployment rate from 27 percent in Q2 2020 to 33 percent in Q4 of 2020, as reported by the National Bureau of Statistics. Forty three percent of the enterprises sampled experienced a decline in the work force – with around 20 percent of workers in the surveyed enterprises losing their jobs during this period. However, 57 percent of businesses were able to maintain their staff strength during the pandemic.

Many businesses, particularly informal ones, also reported poor access to credit and capital to sustain their enterprises, including difficulty paying fixed costs like rent. Many business owners have had to rely on personal savings or leverage support from families and social networks in order to sustain their businesses. The necessity of ensuring access to cheap credit or loans and possibly targeted funds to support enterprises in struggling sectors is further highlighted through the results.

A small minority of enterprises, however, either registered gains or proved to be more resilient across the various facets and elements of business activity that the survey investigated. For instance, those with flexibility and ability to switch to e-commerce models fared relatively better than those unable to leverage digital infrastructure, highlighting the need for more investment in bridging the digital divide among various locales in the country.

This mixed bag of results was reflected in the varying expectations of business owners for the coming year, with some optimistic and others pessimistic about the future and what it holds for their enterprises.

There is a great degree of uncertainty in the short term among enterprises regarding the future viability of their business models. This could be due in part to the possibility of renewed disruption and lockdowns in the event of a third wave of the pandemic or delays in vaccine distribution. This manifested in the expectation among a significant percentage of businesses that the growth of the labour force is likely to remain anaemic, which could have serious consequences for unemployment in the country and necessitates the shoring up of social welfare support.

The combined data gleaned from the survey offers deep insight into the business environment in Nigeria, with detail that is far more granular than is normally available. This data can help guide interventions to support ordinary Nigerians and especially small and medium enterprises in a challenging business environment, to allow them to survive and thrive in a post-pandemic future, and to better target interventions meant to advance the Sustainable Development Goals (SDGs), particularly as they relate to supporting nascent sustainable business ventures

Prince Chukwudi Timothy Samuel

Prince Chukwudi Timothy Samuel is the Chairman / CEO, MicMiraSteph Communications and Chief Media Director, Apex Reporters

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