BY NAOMI UZOR

The Lagos Chamber of Commerce and industry (LCCI), has said that the security situation has become a major challenge for investors and it’s already taking its toll on the economy.

Speaking at the second quarter press conference on the economy, the President of LCCI, Mr. Goodie Ibru said the economy of many of the affected states are on the verge of collapse with implication for investment losses and job losses.

“Hospitality industry in the affected states have been paralyzed; Many investors, especially SMEs, are relocating to other states with the attendant challenges; Inventory and stocks of many companies have been trapped in some locations in the affected states; Many firms have lost up to 30 per cent of their sales as they can no longer access most part of the northern market; Manufacturing firms sourcing raw materials from the north are now facing serious challenges” he stated.

He said projects funded by banks in the affected states are now at risk and many bank branches have been closed, while the working hours for others have been drastically reduced; adding that sales representatives of many companies have fled the affected states, many projects under construction in the north have been abandoned and security budgets have been scaled up by many firms.

On the credit situation in the economy, Ibru said banks tolerance of manufacturing sector continues to decline, perhaps because of the perception of the sector as very risky.

“Many SMEs lack the capacity to package bankable credit requests; some are too small to access credit individually; Many entrepreneurs cannot meet the banks’ credit requirement, especially collateral; Experience of the banks with loan quality of manufacturing and other real sector investors would not dispose them to give further loans; Monetary policy tightening of the CBN has pushed up cost of fund; Risk asset provisioning requirements of the CBN is a disincentive to lending; Capacity of banks to analyse credit in some sectors is very weak. Examples are Agriculture, ICT, Oil & Gas, and Engineering; Cost of fund in generally between 20-25 per cent. Not much business can generate a return to match this cost” he said.