An Evaluation of the Impact of Covid-19 on the Working Capital of Small and Medium Enterprises (SMEs) in Nigeria

Abstract

The outbreak of the current COVID-19 pandemic has affected many businesses all over the world. The Small and Medium Scale Enterprise (SME) is not left out. SME is one of the largest business outfits in Sub-Sahara Africa that play an important role in the development of any nation's economy. It accounts for 96% of businesses world over. It is a key source of innovation, dynamism and flexibility in industrialised and emerging economy like Nigeria. SMEs are efficient and prolific job creators, seed of big businesses that facilitate poverty reduction. In Nigeria, SMEs contribute to a whopping 48% to our national Gross Domestic Product (GDP) indirectly improving our per capita income; 84% of employment, increase value addition to raw material supply, improve export earning, enhance capacity utilization in key industries and unlock massive economic expansion.

In this work, the researcher evaluates the above impact by measuring the relationship between SMEs Working Capital and their performance during the on-going COVID-19. Also to assess the state of nature of SMEs resources and ways to revitalize the enterprise and customer needs with post-COVID-19 recovery priorities.

Data were collected from 17 major categories of SMEs through online link and via e-mail/Whatsapp correspondences. 50 responses were received in all from SMEs operators – managers, accountants, marketing/human resources managers. Descriptive and Inferential Statistics were used to analyze the data. The result R = 0.134, p < 0.01 indicated that the relationship between SMEs working capital and its performance was very insignificant during the active period of COVID-19 pandemic.

The pandemic has impacted the SMEs with constraints in liquidity, cash flow with increased payment delays on receivables etc. resulting in an endemic depletion in working capital. It has also led to decrease in sales, low patronage, difficulties in accessing input/raw materials, in paying staff salaries, in changing production volume and decrease in product sales price.

The study recommended fiat revitalization of SMEs resources and consumer needs through consistent information between SMEs stakeholders and consumers; establishing a team to focus on credit collection and supply chain for online sales and delivery and implementation of government financial assistance from IFC through FCMB and to be monitored by SMEDAN just while the COVID-19 pandemic lockdown eased out.