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NACCIMA predicts tough times for foreign, local investors

By on December 25, 2014

The Nigerian Association of Chambers of Commerce and Industry, Mines and Agriculture (NACCIMA) on Tuesday stated that local and foreign investors in the country must brace up for an extremely turbulent  operating environment in the coming year, with the coming elections and other economic upheavals set to test the resolve of investors in the country.

Listing the factors that will ambush operators in the Nigerian economic space in 2015, the umbrella body of chambers of commerce in the country noted that the Central Bank of Nigeria’s (CBN’s) recent increase in Monetary Policy Rate (MPR) from 12 to 13 per cent, the devalued Nigerian currency and the plummeting oil prices with all the attendant effects would conspire to make Nigeria a tough investment destination in 2015.

The national president, NACCIMA, Alhaji Mohammed Abubakar, said the increase would further endanger the nation’s ailing industrial sector, considering the current global outlook.

Abubakar, who was represented by the first Deputy National President, NACCIMA, Chief Bassey Edem, at a press briefing to review the state of the nation, added that investors have continued to express concerns over the high lending rate in existence affecting their businesses, saying that the increase would only worsen the current economic situation.

“We therefore counsel that the federal government should initiate policies that will create an enabling environment for investors to look inward for investment opportunities, while working towards reducing the MPR to  single digit,” he said.

He stressed that while appreciating the need for the ECOWAS Common External Tariff (CET), the chamber also expresses concerns over the nation’s borders which would be thrown open to the influx of goods from within the West African region as a result of the CET scheduled to take effect from January 2015.

“This is another challenge for our growing industries that are currently battling with the devaluation of the naira amongst other challenges,” he said.

He advised that the need to ensure compliance with all protocols signed by ECOWAS to eliminate dumping of goods in the region becomes of great importance if the nation’s growing industries are to survive with the implementation of ECOWAS CET and to achieve the realisation of the Nigeria Industrial Revolution Plan (NIRP).

On interest rate, he stated that there were still gaps between the savings and lending rates, stressing that the cost of funds currently hovers between 22 to 35 per cent depending on the profile of the firms, which is too high for any productive venture and having significant implication on the global competitiveness of Nigerian firms and their products.

He said due to a lot of pressure on the naira as a result of high demand, the CBN devalued the naira to an official rate of N168 dollar, pointing out that the interbank exchange rate still goes as high as N185 to a dollar as at  December 22.

“As can be seen, the macro economic fundamentals are less stable than they were in the first half of this year and this has serious implications on the progress of the real sector of the Nigerian economy,” he said.

He lauded the plan of the government to cut non-essential and non-developmental expenditure from the 2015 budget, but advised that government should ensure strict adherence to the measures being put in place.

“In addition, we counsel that there is need to reduce the cost of running government by pruning down the number of political appointees as well as pruning downward the expenditure of the National Assembly,” he noted.
According to him, the decline in crude oil prices is not a surprise, saying that it was foreseeable and predictable.

“Over the years, NACCIMA had consistently warned that the price of Nigerian crude oil which sold at an average of over $110 per barrel was not sustainable. It should be noted that falling oil prices is not the only issue Nigeria is facing today.
Others include oil theft, shut-down in production, illegal refineries, pipeline vandalism and royalties, as identified by the Nigerian Extractive Industry Transparency Initiative and others,” he stressed.

He said as a result of these challenges, It is estimated to cost Nigeria billions of dollars yearly with the excess crude account down too $2 billion from $9 in the past 18 months.

Also speaking at the event, the the vice-president, NACCIMA, Alhaji Remi Bello said any investment requiring double digit rates is not attractive for investments in the country, saying that with double digit interest rates, Nigeria will remain uncompetitive in the global market.

In his words, “Nigeria is still plagued with infrastructural challenges, SMEs still borrow at 19 per cent, the manufacturing sector is not a sector to be in due to cost of funds, competition from the Asian Tigers, porous borders where influx of substandard goods come in. This is not good for any economy that wants to achieve a rapid economic growth.”

He projected that the export business for Nigeria in 2015 will experience a positive impact owing to the devaluation of the naira by the CBN, maintaining that made-in-Nigeria goods will attract a lot of patronage in the international market because their prices will drop as a result of the devaluation.

He stated that Nigeria was likely to have a slow growth rate at four per cent due to whaat he termed as cost push inflation.

“Naira has been exchanged for N186 ‎a dollar, people say it will get to N200 soon, but from my own opinion, it might even get to around N250 in April, 2015 and with the current budget for 2015, I believe we are starting off at a false note. We should all belt up for a very challenging 2015,” he stressed.

 

[ThisDay]