BY LAZARUS IBEABUCHI & WILLIAM JIMOH

The impeachment threat on President Goodluck Jonathan over the poor budget implementation is causing uncertainty and may put a caution tag on Nigeria as an investment destination, analysts at Partnership Investment Company has said.

While the outrage continues over the poor implementation of the 2012 budget, the challenges confronting the economy have not abated, the company said in its weekly report, adding that corruption, insecurity, poor infrastructure and the asymmetry between the level of growth and actual development remain the issues confronting Nigeria.

“While GDP is growing at about 6%, the impact on the citizens in terms of quality of life is not so obvious. Electricity power supply remains the major infrastructure deficit currently confronting the country. Last week, the Bureau of Public Enterprises (BPE) received 54 bids from potential investors in the 11 electricity distribution companies in the ongoing privatization of the Nigerian power sector.

“A fortnight ago, the BPE received bids from 25 investors for the six generation companies while the Transmission Company of Nigeria has already been handed over to Manitoba Hydro International of Canada.”

The analysts said this exercise marked the first concrete effort by government to tackle the power shortfall. “We expect that if this process is conducted in a transparent manner, the country may finally be on its way to solving the power conundrum.”

Taking a cursory look at the nation’s apex bank activities, the company said the recent Central Bank policy to reduce the net open position of banks from three per cent to one per cent of shareholders fund, increase the Cash Reserve Requirement (CRR) from eight per cent to twelve per cent and restriction of cash movement between repo window and interbank lending and foreign exchange auction has tightened liquidity.

“This has raised the cost of funds in the system with the attendant implication for the economy. We expect this trend to persist until release of funds to the tiers of government, which will also be followed with funds mop-up of the Central Bank. The restriction of funds movement in the money market may actually be pushing funds to the stock market as seen by the rise in market performance indicators during the week.”

On its sectoral analysis of the Conglomerates Sector of the Nigeria Stock exchange, the company said that the market downturn took its toll on the sector shedding 1.5 per cent in market capitalisation in the last two months. From N94.44 billion or 0.74%, the total market capitalisation of the six equities listed in the sector have dropped to N93.02 billion or 0.72%.

“As the most diversified sector on the bourse, firms listed face the same challenge as other manufacturing and trading concerns in the country. The challenge of poor infrastructure, volatile exchange rate and inconsistent government policies all combine to create a hostile operating environment.

“However, many firms have adopted backward integration, relying more on local raw materials and less on importation in order to leverage on economies of scale and develop local competences. This has become strength for such firms. For instance, Transcorp has delved into agricul-ture while also developing other areas to generate revenue.