By Peter Egwuatu
LAGOS – The Lagos Chamber of Commerce and Industry, LCCI, has listed unbearable energy costs and high interest rates as the greatest impediments to businesses in 2011.
In a business environment review report for 2011 entitled: “LCCI Business Environment Report” issued yesterday, the Chamber said: “Firms reported that the most critical problem faced in 2011 was the unbearable energy cost which was a consequence of the appalling state of the power sector.
“The escalating cost of diesel (AGO), LPFO, aviation fuel and gas reflects this reality. The outcome was that profit margins of many firms were considerably eroded and the survival of many businesses put at risk.
“The second most critical problem reported by firms during the year was access to credit and the high cost of funds. Many firms could not access credit due to the impossible conditions given by the banks. Collateral requirements were far beyond the capacity of many borrowers. The few firms that were able to get credit did so at intolerable rates.
“The CBN monetary policy tightening in the second half of the year worsened the situation. Firms also lamented the recurrent upward review of lending rates even on existing facilities. This created planning and costing problems for the firms.
There were reports that some banks set a minimum credit to corporate bodies at between N20m to N25m, which meant an exclusion of many small businesses from accessing credit in such banks. Dearth of long term funds in the banking system was also an issue for concern.
The beneficiaries of the CBN intervention fund in the manufacturing sector applauded the initiative as it brought significant relief to them in reducing their cost of fund and easing their cash flow. But the concern was that the beneficiaries were very few and the facility was only for those firms that had existing facilities with the banks.”