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Business sector worries over weak economic activities

By Marcel Mbamalu, News Editor   |   03 August 2015   |   3:02 am  
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Nobel laureate, Prof. Wole Soyinka (right); his wife, Folake; Edo State Governor Adams Oshiomhole and his wife, Iara at a reception organised for the Oshiomholes by the Soyinkas in their Abeokuta home, Ogun State…yesterday

• Demands blueprint, foresees protracted consumer depression
• ‘Name-and-shame’ policy exposes deeper rot in banks 

AS President Muhammadu Buhari plans to name his ministers and special advisers in September, Nigeria’s business community is pushing for clear economic policy direction to stem slowing growth and what the Lagos Chamber of Commerce and Industry (LCCI) described as a ‘lull.’

Already, business activities are at standstill as the import-based economy adjusts to the Central Bank of Nigeria (CBN)’s ban on official sale of foreign exchange for importation of more than 40 items.

The situation is also worsened by the escalated war on terror and the seeming instability in the legislative arm of government. While a few analysts welcome the CBN’s naira-control measures, there are concerns that commensurate efforts to fund local production through cheap bank loans are lacking.

Ironically, consumers now grapple with rising costs, just as liquidity squeeze continues to slow down economic activities and whittles down the purchasing power of Nigerians. “Nothing works now because the automobile market is going down; those who are supposed to buy our fairly used cars are themselves putting up their used vehicles for sale.

Every Estate in Lagos now is a big car market; vehicles marked, ‘for sale’ overtake the roads. The entire Airport Road, Ikeja is littered with cars whose owners are in desperate need of cash to solve domestic problems, Mr. Ugochukwu Mogbo, a Lagos-based car dealer told The Guardian.

Also, a trader, who runs a major distribution outlet at Lagos Trade Fair Market , says: “High cost of foreign exchange (forex) for importation,” low tempo of economic activities and resultant poor sales are forcing many importers to put up their shops and warehouses for sale.

Many of the shops, she said, were originally offered for N12 million three months ago but were further reduced to N9 million when buyers became hard in coming. “As we speak, none of the shops has been sold because there is no money anywhere.”

As the CBN sticks to its guns on forex matters, including rates, the business community in Lagos – the hub of Nigeria’s economy – yesterday expressed ‘deep concern’ about the future of enterprise, especially in the short term.

Consumer depression may last 12 months’ Hours after the Economics and Politics Research desk of the Renaissance Capital (RenCap), observed weakening economic activity and projected that consumer depression would be protracted given the Central Bank’s “fixation on a strong naira,” a cross section of the business sector – including manufacturers – demanded immediate release of an economic blueprint by the Presidency so that businesses could survive the current short-term challenges of political transition.

We expect consumer confidence to improve moderately in 3Q15, following the proposed clearance of $2 billion in salary arrears,” RenCap said in a correspondence with The Guardian.

However, in the short term, as we expect economic growth to remain weak (as implied by our 2015 growth forecast of 3.4 per cent, when 1Q15 growth was 4.0 per cent) and monetary policy tight (given that the central bank seems fixated on a strong naira), we think consumer confidence will likely remain in a slump.

Stakeholders want clear economic blueprint In separate telephone interviews with The Guardian, President of the Manufacturers Association of Nigeria (MAN), Mr. Frank Jacobs, and Director-General of the LCCI, Mr. Muda Yusuf, urged the Federal Government to unveil a clear policy direction for the private sector to follow. According to Jacobs, “MAN is satisfied with the fight against corruption but hopes it will be sustained.”

But he quickly added that “there is a lull in the economy. As long as we do not know the direction of government policy, things cannot move in the private sector. Everybody is waiting for the government to come up with a policy statement — the thrust of governance.

This will help us (the business sector) key in and begin to do business.” Jacobs stressed that ministries, departments and agencies of government have failed to patronise made-in-Nigeria products, notwithstanding the provisions — to that effect — in the Procurement Act.

He said manufacturers, under the aegis of MAN, had come up with a proposal that would help the Buhari presidency engender economic growth. For the LCCI, Nigeria’s “revenue outlook, policy uncertainty and the management of foreign exchange market are three principal factors responsible for the current lull in the economy.”

Yusuf described the fiscal outlook as “not good for now,” because “governments at all levels have not been able to meet their basic financial obligations either to the citizens or to the corporate entities.

This has affected the cash flow situation in the economy. Policy uncertainty Yusuf argued that there is yet no clarity in the policy direction of the Buhari administration “and this is a major factor for investor confidence.

The uncertainty that began in January this year seems to have lingered. This administration needs to make a clear pronouncement with respect to its fiscal policy, tax policy, deregulation of the downstream of petroleum industry, trade policy, reform of oil and gas, the power sector, the 2015 Budget, the auto policy, sectoral policies, among others.”

According to him, all these are necessary for investors to have a clear insight into the policy direction of government and enable them take position on the economy.

Foreign exchange policy He said the foreign exchange policy of the CBN also has a dampening effect on investor confidence, as “there is no clear framework for foreign exchange management.

This situation has created room for speculation which also puts pressure on the foreign exchange market.” He said the recent policy on exclusion of some items has affected some segments of manufacturing sector as some critical inputs have been caught up in the policy.  “Their continued production has been put at risk as a result.”

Capital market He said “all these factors” – fiscal/forex issues and policy uncertainty -have combined to create a serious decline in the capital market as well. “The market capitalisation has been on steady decline over the last couple of weeks,” said Yusuf. The DG of the Lagos Chamber said the way forward would be to restore confidence in investors by bringing clarity to the economic policy space.

Name-and-shame policy exposes rot in some banks Meanwhile, 18 Deposit Money Banks (DMBs) and discount houses have begun to ‘name and shame’ chronic debtors in line with the directive issued by the CBN. The debtors list released by some of the banks exposed a dog-eat-dog syndrome, as companies belonging to some board members of competing banks owe huge sums of money.

Although more than 1,600 names of debtors are expected to be published in at least three national newspapers – beginning from Saturday, August 1, 2015, many of the banks strategically began the process today (Monday).

Sources in some of the banks told The Guardian last night that only chronic and recalcitrant debtors would be published, just as debtors below the N50 million threshold will escape the hammer.

The CBN had, on April 22 directed the banks to commence the publication of the names on August 1, after the expiration of three-month ‘grace period’ that was scheduled to end on Friday, July 31, 2015.



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