By Franklin Alli
Lagos Chamber of Commerce and Industry, LCCI, expressed optimism of improved business environment in 2014 in spite of persisting challenges facing the real sector.
Alhaji Remi Bello, President of LCCI told Financial Vangaurd, “SMEs and the manufacturing sector remains the most troubled sector as evidenced by the negative investment sentiments expressed by the operators throughout the year.
“As the New Year begin, the LCCI hopes for a better business environment in 2014. We hope for improvement in the productive capacity of the Nigerian economy, the prosperity of enterprises and an improvement in the welfare of Nigerians.
“GDP growth in 2013 was strong at over 6 percent and in line with IMF projections and Federal Government’s estimates.
The concern, however, is the increasing disconnecting between the impressive growth numbers, productivity, quality of life and employment. This reality is reflected in the country’s performance in some major global rankings released in 2013.
Whereas Nigeria’s GDP ranking by the IMF was 37th out of 187 economies profiled; global competitiveness ranking by the World Economic Forum was 137th of 183 economies reported; while the Human Development Ranking by the UNDP was 153 out of 187 countries profiled.
In 2013, the year on year inflation rate trended at single digit up until October 2013 with an inflation rate of 7.8 percent. This is very impressive and in line with CBN aspiration of a modest price level in the country.
We hope that this trend is sustained in 2014 because stability of the price level remains a key factor for doing business. How much the exit of the current governor of the CBN, Mallam Lamido Sanusi come 2014 will affect the prevailing macroeconomic stability in the country remains to be seen.
The naira exchange rate also fluctuated within the set bound of N160 per dollar (plus and minus 5 percent) throughout the year.
We are satisfied with the apex bank’s efforts at ensuring exchange rate stability and we hope that this is sustained in 2014. Our concern is the continued protection of the exchange rate on the back of high interest rate with the attendant negative outcomes for businesses, output, employment and growth.
Foreign reserve peaked at $48.2 in August before it moderated to $43.9 billion at the end of 2013. The falling receipt from the nation’s mainstay (oil and gas) is largely responsible for declining level of foreign reserve. We hope to see a more responsive fiscal management and diversification of the economy as a response to the growing fragility in the global oil and gas market.
Business Confidence Index (BCI), the indicator that measures investment sentiment of business operators in the country moderated to 17 percent towards the end of 2013. The index had maintained a steady improvement over the first three quarters of the year (10.5percent in Q1, 16.5 percent in Q2 and 24 percent in Q3).
The moderation of the BCI score in Q4-2013 suggests that business leaders are likely going to be softer towards expanding their investments in the early months of 2014.
“In 2013, FG budget approval delays and poor implementation of capital projects remains a major concern for the private sector.
In an economy where government accounts for a major component of expenditure, early passage and proper implementation of budgets are very crucial. Going into 2014, we hope to see a more responsive budget approval processes and improved implementation of the budget at both the states and the FG levels.
“Agriculture: We commend the FG over the ongoing agricultural sector transformation initiatives in the country. Agricultural sector has the largest potential to diversify the Nigerian economy, create jobs, ensure food security and expand foreign exchange earnings.
Transforming the Agricultural sector at this time is compelling giving the increasing wave of uncertainty in the international and domestic oil and gas market.
Going forward, LCCI would like to see an inclusive and integrated agricultural sector transformation with a greater trickle down to the bottom of the pyramid within a reasonable time frame.
We encourage the drivers of this initiative to design a strategy to accommodate small farmers who account for over 90 percent of output and activities in the sector.
“Oil & Gas: The evolving global energy market dynamics suggest an urgent need to take a sober look at the Nigerian oil and gas sub sector in particular and the energy sector in general, especially given the importance of the sector to the Nigerian economy.
Despite the declining contribution to the nation’s Gross Domestic Product (GDP) – currently at 13 percent (based on 1990 Prices of GDP computation), the extreme dependence of government finances and external trade balances on proceeds from the sector exposes the nation to significant risks from oil price and production shocks.
“Power Situation: We note the progress made so far on the power sector reform particularly on the privatisation of the sector.
However, the power situation has continued to pose even more severe challenges to business operators. There are complaints across all sectors of high energy costs especially high expenditure on diesel and maintenance of electricity generators.
This has continued to take its toll on the bottom line of investors in the country. Hopefully, 2014 may hold a positive outcome for the power sector on the back of current reforms.
“Imperative of Economic Diversification: The permanent hedge against the impending oil market glut is a substantial diversification of the economy from oil to non-oil activities. In the short term however, enacting a competitive, Petroleum Sector legislation – the PIB is germane.
While we note that the passage and implementation of the right PIB will not entirely eliminate the problem, it would expand investment in the sector. Curbing corruption and other forms of fiscal leakages would further stabilise the economy.
“Developments in the Political Space: The Chamber is concerned about the growing tension in the political space as pre- election activities gather momentum and heating up the polity. We wish to stress that political stability is critical for the sustenance of investors’ confidence and the progress of the economy.
The omens in the outgoing year are not good enough and have created some discomfort among investors.
We therefore appeal to the political class to avoid desperation in their quest for public office as well as play by the rules. It is also critical that the credibility of the electoral process is not compromised”