Effect of COVID-19 on the Performance of Small Businesses in Nigeria

Senol Dane^1*, Murat Akyuz² and Michael Isaac Opusunju²

^*Correspondence: Senol Dane, Department of Physiology, Faculty of Basic Medical Sciences, College of Health Sciences, Nile University of Nigeria, Niger, Email:

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Introduction

Coronavirus brought about challenges such as an increase in the infected persons and death making the two countries lockdown economic activities such as import and export and local business transactions with the border [1]. In a recent study, it has been reported a negative effect of COVID-19 on entrepreneurship development (innovation) among women entrepreneurs [2]. It is also stated that COVID-19 has reduced sales growth and decreased employment opportunities, as well as lowering the rate of customers' ownership of a particular product in the market. COVID-19 is affecting the world by reducing international business transactions and keeping borders close.

From the effect of COVID-19, the small-scale enterprises in FCT, Abuja implemented government policies of COVID-19 such as social distancing, wearing of face masks, washing of hands with water and washing of hands with sanitizers to growth the small businesses by ensuring that there is increase in sales, increase in customers, and increase in employment. Yet, the small-scale enterprises in Abuja experience decrease in sales, decrease in customers patronage, and decrease in employment.

There are a lot of studies about the negative effects of COVID-19 on the performance using different organizations in different places [3-7]. However, none of the studies used the growth to measure performance such as increase in customer’s patronage, increase in employees, and increase in sales.

The objective of this study is to examine the effect of COVID-19 on the performance of small scale enterprises in Abuja Federal capital territory, Nigeria and the specific objectives of this study is to determine the effect of COVID-19 on the growth of small scale enterprises in Abuja Federal capital territory, Nigeria.

The hypothesis is stated in a null form as: H01: COVID-19 has no significant effect on the growth of small-scale enterprises in Abuja Federal Capital Territory, Nigeria.

Concept of COVID-19

The coronavirus began in Wuhan, Hubei Province, China. Residents who lived in Wuhan had some link to a large seafood and live animal market, which suggest that the mode of transmission of coronavirus was from animal to person. The virus has been named “SARS-CoV-2” and the disease it causes has been named COVID-19. The first known patient of coronavirus started experiencing symptoms in Wuhan, China on 1 December 2019. Since then, there have been over 800,000 reported cases around the world. Covid-19 is severe acute respiratory syndrome that has the capability to transmit between the animals and humans [8].

Concept of performance

Performance is the behavior on how a target is achieved [9]. Performance is in two forms which are financial performance and non-financial [10]. Performance is a general structure that refers to the operations of the enterprise [11]. It has been noted that performance reflects the productivity of members of an enterprise measured in terms of revenue, profit, growth, development, and expansion of the organization [12]. Performance is defined as how an enterprise is doing in terms of an increase in profit, market share, product quality, and expansion about other enterprises in the same industry [10]. Performance is measured using diverse parameters by different organizations some firms measure it through expansion, survival, number of employees, and capital employed [13].

Growth

Growth is defined as the organization recorded an increase in the raw material used in the production of goods and services it implies in the organization is growing [14]. Growth is an important phenomenon in small enterprises. In fact, their survival essentially depends on their power to participate in the market with other big companies [15]. In another study, it has been reported that growth is proxy by customers increase, increase in printing jobs, expansion of the business [16]. Also, growth is the increase in total sales volume, increase in production capacity, increase in employment, increase in production volume, increase in the use of raw material and power [17].

Literature review

It has been examined both the short-term and mid-term impact of COVID-19 restrictions on small and mediumsized enterprises (SMEs), based on two waves of phone interviews with a previously surveyed large SME sample in China [3]. The outbreak of COVID-19 and resultant lockdowns cast a heavy toll on SMEs. Affected by problems of logistics blocks, labor shortages, and drops in demand, 80 percent of SMEs temporarily closed at the time of the first wave of interviews in February 2020. After reining in COVID-19, authorities largely eased lockdown restrictions in April. Consequently, most SMEs had reopened by the time of the second round of surveys in May. However, many firms, particularly export firms, ran at partial capacity, primarily due to inadequate demand. Moreover, around 18 percent of SMEs closed for good between the two waves of surveys from February to May, shedding 14 percent of total jobs.

Aliyu, et al. investigated the effect of COVID-19 on business activities in Nasarawa West Senatorial Zone [18]. Data were gathered through questionnaire and analyzed using descriptive statistics and regression analysis. A sample of 300 respondents was drawing using Yamane, et al. simplified formula with a population of 1,200 respondents to elicit information [19]. The findings showed that COVID-19 has established the inhabitants in the region and their general well-being affected to a very large extent as governments’ instituted lock-down measures and banned public gatherings. The study concluded that COVID-19 affects business activities and the general well-being of the inhabitants of Nasarawa West Senatorial Zone.

It has been examined the effects of COVID-19 on Small and Medium Scale Enterprises (SMEs) in Lokoja, Kogi State of Nigeria [5]. The study used a sample comprising of 100 respondents which include both small and medium scale business owners. Data was collected through a structured questionnaire and was analyzed using descriptive statistics. The findings showed that business owners in Lokoja are aware of Covid-19 and its mode of spread. It is also revealed that income of SMEs reduced, prices of materials inputs increased and some workers in SMEs are laid-off. Equally, the demand for the products of SMEs has declined due to restrictions in movement.

Timothy, et al investigate the impact of COVID-19 pandemic on selected small and medium enterprises in Nigeria, with a view to ascertaining the impact of lockdown on SMEs engaging in three essentials-food and consumables, pharmaceuticals, oil and gas in Sango-Ota industrial area of Ogun state, Nigeria [6]. Data were collected with the administration of structured set of questionnaire on 100 SMEs which were selected purposively. Findings from the analysis showed that the enterprises experienced moderate reduction in production and sales during the lockdown. However, the surveyed enterprises experienced a spike in reduction of contracts and deliveries

Mazikana, et al. highlighted the impact of COVID-19 on SMEs performance in Harare, Zimbabwe [7]. The virus was first detected in China in late December 2019 but the impact on various economies was perceived only later. According to various surveys conducted over different time periods in various countries showed the largest share of companies that experienced a decline in demand and sales for their products. In some countries such as Colombia and United States of America there were mass layoffs and closures which occurred just a few weeks into the crisis [20]. In Zimbabwe many organizations have suffered disruptions in supply chains due to the ravaging global health pandemic COVID-19. Globally, the coronavirus has mostly negatively affected the demand and sales of companies.

Theoretical framework

The social-ecological theory

This theory was developed by Bookchin in 1960 and theory offers an understanding of behavioural reactions from a person, interpersonal, organizational, community, and public policy concerning the formation of behavior within the nearby social environment [21]. The theory assists in the recognition of issues affecting behaviour and also offers direction for developing successful programs through social environments. The socialecological theory emphasizes the numerous levels of influence (such as individual, interpersonal, organizational, community, and public policy) and the idea that behavior is shaped and shaped by the social environment. The philosophies of Social-ecological Theory are connected with Social Cognitive Theory perceptions which propose that providing an enabling environment that results to change is significant in making it easier to implement healthy behavior. With the emergence of COVID-19 which separates Nigeria from other countries of the world, serious attention should be given to shaping and adopting healthy behavior such as sanitization, social distancing, movement restriction, and ban on worship, testing suspects, isolation, quarantining, and business closures. The relationship between the theory and this study is a detailed understanding of the reasons why people behave the way they behave.

Methodology

The study adopted survey research design and employed the used of primary. The population of this study comprises owners of small-scale enterprise in federal capital territory (FCT). According to the National Micro, Small, and Medium Enterprises (MSME) Survey Report (2020) the total population of owners of small businesses in Abuja in the areas of manufacturing, accommodation/foods hole/retail sales sectors are 689. The breakdown is shown in the Table 1.

Table 1: Sector of small businesses.

The study adopted Taro Yamane statistical formula (1969) to derive the sample size as calculated below.

N =N/1+N (e)2.

Where N is the population size.

E is the margin of error (assume 5%).

1=constant.

e=0.05.

n=689/1+689 (0.05)2.

n =689/1+689 (0.0025).

n=689/1+1.7225.

n=689/2.7225.

n=253.

The sample is 253 which imply that 253 copies of questionnaire is administered to the respondents who are the owners of small businesses in Abuja, Nigeria. A stratified sampling technique is used in selecting owners of small businesses in Abuja since the study used manufacturing, accommodation/foods and whole/retail sales in the six area councils in Abuja. The questionnaire was administered on the basis of proportion as indicated in the Table 2.

Table 2: Proportional method of sample selection.

From the above table, the study revealed that manufacturing sector received 67 copies, accommodation/ food services received 118 copies and retail/wholesale received 68 copies. Data were collected from the six local government councils mentioned and more specifically from the businesses mentioned in the scope (manufacturing, accommodation/foods and wholesale/retail). A Five Point Likert’s Scale questionnaire was designed to elicit information from respondents. The questionnaires were administered to the owners of small-scale enterprise in the six area councils in Abuja. Respondent filled and returned the completed the questionnaires. Though managers of some of the small-scale enterprises in Abuja, were employed to help in administering the copies of questionnaire to the owners in their respective firms. The completed questionnaires were collected and used for the analysis.

Ordinary least Square regression technique was used for the analysis, and Regression was used for the estimation of the growth of small scale enterprise which is the dependent variable was used to regress on the independent variable while correlation measures the strength of the relation. The questionnaire was tested for content viability and reliability to assure that it can address properly the questions being answered. Hence, cronbach’s was also used to measure the internal consistency and the resulted from the reliability test as presented in Table 3.

Table 3: Scale reliability of variables.

The researcher used SPSS statistical package to compute the reliability test and results obtained are reliable. For the study, the independent variable is COVID-19 which was proxy social distancing; wearing of face masks and washing of hands with water and the dependent variable is performance which is proxy growth (staff strength, increase in sales and increase in customers). The model is stated as follows:

GR = α + β1COVID-19 +μ …………………… …………….……….. 1

Where GR = growth (staff strength, increase in sales and increase in customers) which is the dependent variable, and α is the intercept β1, is the parameter to be estimated as the independent variable and as such COVID-19 is represented with (social distancing, wearing of face masks , washing of hands with water and washing of hands with sanitizers).

Results and Discussion

The table 4 indicates that 8.69% of the respondents strongly agreed that social distance is implemented by the managers of small businesses in FCT, Abuja. 7.51% of the respondents agreed that social distance is implemented by the managers of small businesses in FCT, Abuja and 34.38% of the respondents were undecided. 31.62% of the respondents strongly disagreed that social distance is implemented by the managers of small businesses in FCT, Abuja and 17.79% of the respondents disagreed that social distance is implemented by the managers of small businesses in FCT, Abuja.

Table 4: COVID-19.

It also indicates that 13.44% of the respondents strongly agreed that there is effective wearing of face masks by customers and staff of small businesses in Abuja, FCT. 11.46% of the respondents agreed that there is effective wearing of face masks by customers and staff of small businesses in Abuja, FCT and 15.42% of the respondents were undecided. 32.01% of the respondents strongly disagreed that there is effective wearing of face masks by customers and staff of small businesses in Abuja, FCT and 27.67% of the respondents disagreed that there is effective wearing of face masks by customers and staff of small businesses in Abuja, FCT

Table 4 shows that 7.91% of the respondents strongly agreed that washing of hands with water is frequently observed by the managers of small scale enterprises in Abuja, FCT. 13.83% of the respondents agreed that washing of hands with water is frequently observed by the managers of small scale enterprises in Abuja, FCT and 18.18% of the respondents were undecided. 28.06% of the respondents strongly disagreed that washing of hands with water is frequently observed by the managers of small scale enterprises in Abuja, FCT and 32.01% of the respondents disagreed that washing of hands with water is frequently observed by the managers of small scale enterprises in Abuja, FCT.

Table 4 stated that 12.25% of the respondents strongly agreed that washing of hands with sanitizer is frequently implemented by managers of small scale enterprises in Abuja, FCT. 16.21% of the respondents agreed that washing of hands with sanitizer is frequently implemented by managers of small scale enterprises in Abuja, FCT and 17.39% of the respondents were undecided. 31.22% of the respondents strongly disagreed that washing of hands with sanitizer is frequently implemented by managers of small scale enterprises in Abuja, FCT and 22.92% of the respondents disagreed that washing of hands with sanitizer is frequently implemented by managers of small scale enterprises in Abuja, FCT.

The Table 5 indicates that 5.83% of the respondents strongly agreed that small businesses in Abuja, FCT have effective increase in sales. 5.00% of the respondents agreed that small businesses in Abuja, FCT have effective increase in sales and 39.5% of the respondents were undecided. 37.92% of the respondents strongly disagreed that small businesses in Abuja, FCT have effective increase in sales and 11.67% of the respondents disagreed that small businesses in Abuja, FCT have effective increase in sales.

Table 5: Growth of small businesses.

The Table 5 indicates that 4.48% of the respondents strongly agreed that small businesses in Abuja, FCT have frequently increased in customers. 6.25% of the respondents agreed that small businesses in Abuja, FCT have frequently increased in customers and 32.08% of the respondents were undecided. 30.42% of the respondents strongly disagreed that small businesses in Abuja, FCT have frequently increased in customers and 26.67% of the respondents disagreed that small businesses in Abuja, FCT have frequently increased in customers.

The table 5 indicates that 5.00% of the respondents strongly agreed that there is effective increase in staff in small businesses in Abuja, FCT. 5.83% of the respondents agreed that there is effective increase in staff in small businesses in Abuja, FCT and 33.33% of the respondents were undecided. 30.83% of the respondents strongly disagreed that there is effective increase in staff in small businesses in Abuja, FCT and 25.00% of the respondents disagreed that there is effective increase in staff in small businesses in Abuja, FCT.

Descriptive statistics which indicated the mean and standard deviation as well as minimum and maximum value of the variables. The mean value of growth of small businesses in Abuja is 2.72 ± 1.32, the mean value of corona virus (COVID-19) is 2.01 ± 1.4.

Table 6 shows that Fisher-statistics (F) is 1240.036 with an associated P statistic value of 0.000 which suggested that the model is a good fit. The coefficient of corona virus (COVID-19) is negative and significant in performance of small businesses in Abuja, FCT. The GR= 16.62-35.35 COVID-19 which indicates that COVID-19 will decrease by 35% for every 1% increase in performance in terms of growth of small businesses in Abuja, FCT. The p-value of 0.00 is more than the t-Statistic value of -35.214 and the standard error value of 0.02 is more than the t-statistic value which implies that there is negative and significant effect of COVID-19 on performance of small businesses in Abuja, FCT.

Table 6: Regression test.

The coefficient of determination (r2) of 0.83 indicates that about 83% variation in COVID-19 can be explained by performance by small scale enterprises in Abuja, FCT. The remaining 17% can be explained by other related factors not noted in the regression model.

Discussion and Findings

Inactivity due to COVID-19 disease can have a negative effect on physical and mental health and coping with stress and anxiety during isolation time [22,23]. Besides, there were some negative lifestyle changes due to the COVID-19 pandemic [24]. Furthermore, the fairly big changes in food consumption preferences were reported [25]. Also, in another study, there was a significant decrease in family incomes and a significant increase in family expenditures during the pandemic outbreak [26]. Also, Nigerian women entrepreneurs experienced the negative effect of COVID-19 outbreak on their businesses [27].

The results of the analysis indicate that there is negative and insignificant effect of COVID-19 on performance of small businesses in Abuja, FCT. This implies that COVID-19 has negative effect on performance of small businesses in Abuja, FCT. The negative effect is that many small scale enterprises were shut down due to COVID-19 pandemic and many employees lost their employment. Also, COVID-19 pandemic has tempered with the wellbeing and social framework of the owners of small businesses in Abuja, Nigeria. This has disrupted and reduced the social order of business contact that has negatively effects the performance of small scale enterprises. The negative are that reduction in sales, high cost of products and limited importation of foreign goods to reduce the praises of domestic products in the market. The study is in tandem with the finding of some recent studies [4,5] in which there is a negative and significant relationship between variables. The study is in disagreement with no findings in the empirical studies who found significant effect of COVID-19 on the performance.

Conclusion and Recommendations

The study concluded that COVID-19 has negatively affect the performance of small scale enterprises by limiting their growth in terms of reduction in sales, reduction in customers patronage, reduction in employment opportunities and decline in business opportunities. Although, there is a significant effect of COVID-19 on the performance of small businesses in Abuja, FCT which manifested in the area of Pharmaceutical stores and food as well beverages store who open for the survival of the citizen in Abuja, FCT. These firms or sectors were making increase in performance despite the COVID-19 policies of the federal government of Nigeria and the world at least. They were observing the federal government of Nigeria roles and regulations on social distancing, wearing of face masks, washing of hands with water and washing of hands with sanitizers. The study recommended that Government of Nigeria especially Federal Capital Authority Administration in Nigeria should ensure provide financial assistance to small businesses to recover from the negative effect of COVID-19. They should encourage small businesses by removing them from multiple taxations so they can survive their businesses.

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