Lagos Chamber of Commerce and Industry LCCI has warned that the current insecurity in the country has a grave implication for business and investors. At a press conference in Lagos, the President of the Chamber MR. BABATUNDE PAUL RUWASE, FCA said “the growing insecurity in parts of the country is becoming increasingly worrisome. It has grave implications for businesses and investors. Incidence of criminality, such as terrorist activities of Boko Haram in the North East, Herdsmen killings and destruction of farms, kidnaping, armed robbery, cult related violence, religious and ethnic conflicts are prevalent across the country. This has the following implications for businesses and the economy; food security issues and high food inflation; Shortage of local raw materials for agro-allied businesses; Negative effects on investors’ confidence; Adverse global perception for the country. We implore the Federal Government to prioritise safety of lives and properties and provide adequate security across the country. It is important to consider and review current security strategy to ensure safety of lives and property”.
Mr. Ruwase also raised concern over the sharp increase in medical, surgical and dental equipment to 70 per cent by the Nigerian Customs stating that the medical care in the country is already too high. “The Nigeria Customs Service (NCS) recently reclassified HS code for solar panel equipment with a view to increase the tariff. This is in addition to the 20% duty on the batteries, which make up solar home systems. All of these create affordability problems for many households and SMEs that will adopt renewable energy solution. It is necessary to incentivise the adoption of renewable energy solutions by reducing the cost of acquisition of relevant equipment. This would also promote the policy of government on energy mix”.
He further said “the chamber is also concerned about the sharp increase in import duty on Medical, Surgical and Dental equipment to 70%. Given the already high cost of medical care in the country, we request an urgent review of the duty to 10 per cent”. Speaking on the budget he said “we have witnessed the adverse impact of delayed budget passage on the national output and real economic activities. Such delays put budget implementation at risk, it affects the capacity of government to deliver infrastructure projects, it affects payment to contractors, among others. We acknowledge the fact that the 2019 budget has been presented to the National Assembly. We appeal to the National Assembly to consider and approve the budget expeditiously to ensure optimal implementation. We also urge the government to encourage private capital in the delivery of infrastructure projects, through enabling reforms and Public Private Partnership”.
He said “weak government revenue had continued to constrain budget performance. We are dealing with a situation where government revenue can barely fund the recurrent expenditure and debt service commitments thereby putting the delivery of capital projects at risk. This has been a challenge for all levels of government. Oil revenues increased with relative higher oil prices in 2018. In addition, improved tax administration also increased tax revenue significantly. However, we are concerned over the revenue performance of the Federal Government in recent years. It is imperative to ensure improved independent revenue performance in 2019. Many of the revenue generating agencies of the government can do better than their current level of performance and remittance of surplus to the federation account. The creation of better investment environment would also attract more private capital and investment, and this would invariably impact positively on government revenue and employment generation. Government should expedite actions to complete infrastructure projects nationwide such as the Lagos-Ibadan expressway, Lagos-Ibadan rail project, Power Projects, the Second Niger Bridge, East-West Road among others. These projects would have significant positive impact on commercial activities and businesses as they reduce cost of doing business and boost productivity.
“Protracted delay in the passage of the Petroleum Industry Bill (PIB) and weak commitment to the reform of the oil and gas sector continue to stifle investment in the upstream and downstream segments of the oil and gas sector. Enabling reforms are necessary to put an end to the protracted problem of petroleum subsidy and the phenomenon of under recovery, that currently imposes huge burden on government finances. It is necessary to implement necessary oil and gas sector reforms to unlock the vast potentials in the sector for investment, jobs, revenue, backward integration and economic diversification. Government should also facilitate settlement of outstanding contractual obligations and subsidy debts to oil marketers”.
According to the Chamber President “in 2018, the Nigerian economy continued on the path of recovery with average oil prices trending above budget benchmark, while FX liquidity and external reserves remained at comfortable levels despite pressure of capital flow reversals. The latest Gross Domestic Product (GDP) report by the National Bureau of Statistics (NBS) shows that the Nigerian economy grew by 1.81% year-on-year in the third quarter of 2018. This performance is lower than the International Monetary Fund (IMF) and Economic Recovery, Growth Plan (ERGP) growth forecasts of 1.93% and 4.1%, respectively for 2018. GDP growth of 1.81%, which is below our annual population growth of about 3% remain a cause for concern due to its wider implications for welfare, unemployment and poverty conditions in the country.
“The latest report by the NBS shows that the number of unemployed Nigerians rose from 17.6 million in the fourth quarter of 2017 to 20.9 million in Q3 of 2018. This represents a rise from 18.8% in Q4 of 2017 to 23.1% in Q3 of 2018. The growing unemployment figure is a reflection that growth in the economy is still weak, fragile and not inclusive. It is imperative therefore to sustain efforts to create the enabling environment to attract more private capital to boost investment and growth. Inflation rate dropped consistently for 18 months up to July 2018 when it hit 11.14%. Since then, inflation rate has been on the upward trajectory. The latest Inflation numbers released by NBS shows year-on-year inflation rate of 11.4% for the month of December 2018. It is believed that with the expected upward review of minimum wage and election related expenditure, inflation rate will remain in the upward trajectory over the coming months. It is important to enhance non-oil sector productivity to increase output and moderate inflation.
“The Monetary Policy Committee (MPC) of the CBN had consistently left the Monetary Policy Rate (MPR) and other parameters unchanged since July 2016, retaining MPR at 14%, CRR at 22.5% and Liquidity Ratio at 30.0% and asymmetric corridor at +200 and -500 basis points around the MPR. The MPC in their last meeting cited factors such as slow recovery in the economy, rising inflation rate, late implementation of 2018 budget, weakening demand and consumer spending, and expected minimum wage increase as reasons for retaining a tightening monetary policy stand at this time. Access to and cost of funds remain a big issue for many domestic investors. With commercial bank lending rate at between 20-35%, the private sector especially the SMEs had challenges in accessing credit for their businesses. We note the efforts of government through CBN and Bank of Industry (BOI) to extend intervention funds to the private sector operators.
“We also commend the government for enacting the Secured Transaction in Movable Assets Act, 2017 (popularly called Collateral Registry Act 2017) and the Credit Reporting Act, 2017. However, we urge government and its agencies to do more in making sure that credit is accessible to the private sector especially the SMEs. The forex market was relatively calm in 2018 with stable rates and liquidity ease across the markets. We appreciate CBN’s consistent interventions in the foreign exchange market. We, however, have concerns about the multiplicity of exchange rate and the wide gap between CBN N305 rate and other rates at N360 and above continues to create undue arbitrage opportunities, and transparency issues”.
He said “the country is building up to general elections scheduled for the first quarter of 2019, with the presidential election coming up on February 16, 2019. This is another defining period in our democratic history. We note that the political transition and electoral process in the country has far reaching implications for the economy. This is because political and social stability are critical factors that drive investors’ confidence. Thus, it is important to guide against the tendencies that may undermine the credibility of the electoral process. The risks associated with this period includes security risks, governance and policy risks and risk to existing contractual obligations.
“We urge the Independent National Electoral Commission (INEC), security agencies and the judiciary to be independent and fair to all parties. It is important to guide against the tendencies that distract state institutions from governance. There is a strong nexus between political instability and economic progress. An unstable political environment naturally escalates the risk of investment; it creates anxiety and undermines confidence of investors. We urge all political actors to demonstrate restraint and refrain from activities that could undermine the stability of the polity and create avoidable social tension. This has become very important as political and electioneering activities gather momentum. No meaningful investment can take place where there is break down of law and order. We urge the political parties, their candidates, support groups and other stakeholders to play by the rules in order to ensure the integrity of the forthcoming general elections. The quality of the electoral process and the conduct of the major players in the political space are critical to earn the confidence of the citizens, the investors, the stakeholders and international community in the electoral process.”
