The Lagos Chamber of Commerce and Industry (LCCI) has linked the uncertainties in the business environment in the second quarter to epileptic power supply, security challenges, and credit situation. The LCCI’s President, Alhaji Aderemi Bello, made this known during the chamber’s quarterly press conference in Lagos.
Bello said that power supply, insecurity and credit were the major challenges that stifled investment and growth in the second quarter. According to him, the chamber’s 2014 Business Environment Survey revealed that key sectors in the economy like construction, agriculture, manufacturing, Oil and Gas have experienced poor growth.
“Manufacturers, especially SMEs, still have major challenges as sticky access to credit, influx of fake and substandard products, regulatory infractions, and worsening power supply. The building and construction industry have confirmed that the new policy on the grade of cement, poor credit conditions, and delayed payment of contractors are major issues affecting them.
“The new cement policy of the Federal Government which specifies high grades of cement has affected the turnover of some operators, as they complain of a short transmission time to adjust their plants. There is need for government investment in vocational and technical education, as some of the issues raised by the operators include dearth of skilled workforce,” he said.
The president also said that the credit situation was still a major challenge because access to credit, cost and tenure of credit was persistent. He said that investors, especially in the manufacturing sector, expressed concern over the persistent difficulty in accessing credit from the banks because of perceptions of the risk factors.
“Monetary policy tightening of the Central Bank has pushed up the cost of fund; risk asset provisioning requirements of the Central Bank is a disincentive to lending. Also, the capacity of banks to analyze credit is also very weak; examples are the entertainment, agriculture, non-oil exports, and oil and gas sectors.
“Cost of fund is generally between 20 to 30 per cent, not many businesses can generate turnover to match this cost. The condition was compounded by the fact that government treasury bills and bonds have returns between 11 to 15 per cent, which signifies that the government has mopped up available funds. Banks now prefer to buy treasury bills than grant loans to investors. This condition has caused difficulty in creating more jobs through industrialisation,” the president said.
He also noted that the increase in the import tariffs and levies on motor vehicles was potentially harmful to the economy and welfare of the citizens. “It is inappropriate to begin to pursue a self reliant automobile industry with the imposition of high import tariffs, where there are fundamental supply issues to contend with. The creation of a sustainable automobile industry should be premised on high local value addition and capacity for backward integration, strong engineering infrastructure especially on iron rod, steel and foundries.
“Also, it depends on affordable finance of between 25 to 35 per cent cost of fund to investors, creation of sound infrastructure like power and transportation. A lot needs to be done on these key issues if the economy must grow at the least desired rate in the subsequent quarter. We urge stakeholders in the political space to manage the transition programme to boost the growth of the economy which seriously includes the cost of doing business and job creation,” he said.
