CUSHIONING EFFECTS OF COVID-19 ON SMALL BUSINESSES IN NIGERIA
By Cyril Okonkw, Abuja
The global economy has faced difficult times as a direct impact of the Covid-19 pandemic. Many economies across the world have slipped into recession as a consequence of the pandemic.
In Nigeria, following a lockdown in late March, the country’s economy also suffered the impact of the Covid-19 pandemic. Every sector of the country’s economy groaned under the weight of the lockdown. This resulted in some organisations cutting down jobs, while it became difficult for others to pay their workers.
One significant sector that has been severely hit by the Covid-19 pandemic in Nigeria is the Micro, Small and Medium Enterprises (MSMEs). With months of lockdown, small businesses in the country saw themselves in a situation where they lost revenue, had an accumulation of staff wages, lost patronage from their customers and remained on the edge of a precipice. The challenges that affected all sectors of the economy also resulted in the loss of jobs in MSMEs.
Recognizing the dwindling fortunes of the Nigerian economy in the face of the Covid-19, the Nigerian government set up the Economic Sustainability Committee, chaired by Vice President Yemi Osinbajo to work out a stimulus package to tackle the economic challenges occasioned by the pandemic and put the country’s economy on the right footing to withstand the effects of the pandemic in the post Covid-19 era.
The Osinbajo-led Economic Sustainability Committee designed a N2.3trillion stimulus package, which was approved as Nigeria’s response to the economic challenges of the pandemic. The stimulus, tagged the Economic Sustainability Plan (ESP) has a component that targets Micro, Small and Medium Enterprises. This component of the ESP, known as the Survival Fund, is the Buhari administration’s plan to lift the burden put on small businesses in Nigeria by the Covid-19 pandemic.
The Survival Fund component of the ESP is being delivered through four tracks. Through these tracks, government is supporting micro, small and medium enterprises to enable them respond to the economic challenges of Covid-19.
First is the Guaranteed Off-take Scheme. The purpose of this is to safeguard about three hundred thousand existing jobs in one hundred thousand MSMEs. It is estimated that this track will impact about one million individuals and sustain local production. The Guaranteed Off-take Scheme is aimed at protecting MSMEs and ensuring that their workers do not lose their jobs because of the global and national slowdown in economic activities.
The second track is the Payroll Support, which is a conditional grant to support vulnerable MSMEs in designated sectors in meeting their payroll obligations and safeguard jobs from the shock of Covid-19. This track targets fifty thousand small businesses that have a minimum of ten workers and maximum of fifty employees. Small businesses designated as vulnerable under this scheme are hotels, the creative industry, road transport, tourism, and private educational institutions. This scheme also captures daily-paid and self-employed workers and artisans through the provision of interest-free credit to be disbursed through micro-finance and fin-tech credit providers.
Under the third track, healthcare, agro-processing, creative industry and female-owned businesses are supported in an initiative to be led by the Bank of Industry (BOI). Programmes in this track include bouncing back and credit remediation support.
The Economic Sustainability Plan describes track four as a practical and immediate response to micro and small businesses to support resilience and ensure continued local production and cushion the effects of the pandemic.
Nigeria’s Minister of State for Industry, Trade and Investment, Mariam Katagum, said that the implementation of the Survival Fund began on November 17, with the disbursement of funds to approved beneficiaries of the Payroll Support Scheme. Over two hundred and seven thousand individual beneficiaries drawn from 35,837 MSMEs nationwide received their first monthly payment at the commencement of the scheme.
A breakdown of the disbursement shows that N30,000 was paid to each of 180,196 employees or beneficiaries while N50,000 was paid to each of 26,353 employees or beneficiaries.
Beneficiaries of the fund include the self-employed, artisans, transport workers, private school owners and teachers, Bolt and Uber drivers, tricycle operators, technicians, among others, who are eligible to access a one-off N30,000 grant or N30,000 to N50,000 monthly salary for 3 months.
Another deliberate move to provide succor to small business is the Finance Bill 2021. The Executive Bill, which is already at the National Assembly, is aimed at incentivizing businesses. It provides for tax waivers for businesses. The bill exempts businesses whose annual turnover is below N25million from corporate tax.
Government has also intensified the implementation of the enabling business environment policy to ensure that MSMEs in Nigeria are not stifled by regulatory agencies. This policy is driven by the Presidential Enabling Business Environment Council (PEBEC).
Nigeria’s Vice President, Professor Yemi Osinbajo, said that the role of regulatory agencies should be more focused on facilitating the growth of businesses. He stressed that government recognises the roles the private sector, especially the micro, small and medium enterprises, play in building a virile economy.
It is this recognition of the contribution of small businesses that guided the Nigerian government’s drive to cushion the effects of the Covid-19 pandemic on small businesses in the country. The implementation of these safety nets provided for MSMEs in the Economic Stability Plan will also enable them to withstand challenges that could come in the post Covid-19 era.