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LCCI predicts declining investors’ confidence

By BusinessNews Staff on March 11, 2015

The Lagos Chamber of Commerce and Industry (LCCI) has predicted that business leaders will be averse to investing in the nation’s economy, noting that the drop of the Business Confidence Index (BCI) from 30 per cent it posted in ‎the fourth quarter in 2014 to 22.3 per cent, suggests that business leaders are largely pessimistic about expanding their business and investment spending over the next few months.

‎In its Q1 2015 aggregate report made available to THISDAY, the LCCI said the drop in BCI represents a 7.7 per cent point slack of the confidence level among business operators over the last three months noting that this is the largest quarter on quarter point drop of the BCI score over the last three years.

It stated that conventionally, movement of the BCI score by up to five points indicates the presence of significant positive or adverse development in the country’s economic/business environment.

‎According to LCCI, ‎factors that mostly lowered the confidence level of business leaders at this time includes, heightened uncertainty surrounding the 2015 general elections, depressed crude oil price in the international market and the volatile exchange rate leading to significant depreciation of the local currency.

It said over the last few months, business managers and investors have faced heightened anxiety and commercial risks associated to the political uncertainty in the country, maintaining that unpredictable political developments has engendered uncertainty among economic agents, increased the risk profile of new contracts and distorted investment plans.

LCCI added that initial commercial plans and investment decisions across the economy have become very fragile leading to less than optimal operations and delay tactics by companies pending when things will start to normalise.

“Over the years, Nigeria’s BCI scores continues to trail below the 50 per cent global business confidence threshold due to the lingering infrastructural and institutional shortcomings. The first quarter in 2015 BCI survey presented far reaching and very worrisome picture about the state of the economy triggered by profound political uncertainty and oil price fluctuations,” LCCI said

The Chamber pointed out that the oil and gas industry are the worst hit by the uncertainty surrounding delayed passage of the Petroleum Industrial Bill (PIB) coupled with the adverse developments in the global oil and gas market, noting that the approval delay of the 2015 draft budget, influx and rising patronage of offshore consultants, advisers and political risks in the country were mostly the concern of players in the professional business services sector.

On the nation’s Information and Technology/Telecommunications sector, the chamber said uncertainty relating to approval and contents of the 2015 budget, security challenges, regulatory issues and 2015 elections top the concerns of players in the sector‎.

It added that patronage for businesses has been on the decline due to weak consumer demand, depreciation of the Naira, e-trade platforms and rising cost of goods and services.

Furthermore it said business leaders in the financial services sector have revealed that macroeconomic fluctuations, flight to safety due to the general elections, downgrade of sovereign ratings by international rating agencies, policy uncertainty and exchange rate volatility has continued to plague the financial sector of the economy.

The agricultural sector, it added, is still troubled by the continued challenges of access to and cost of credit, infrastructure shortcomings, weak agricultural-industry linkages, transport and logistics constraints‎ while the manufacturers and Small and Medium Enterprises (SMEs) in the country highlighted major challenges hindering the real sector includes the 2015 general elections, cost and access to credit, rising cost of production, exchange rate fluctuation, influx of fake and substandard products, regulatory infractions and worsening public power supply.

LCCI however noted that operators in the hotel and tourism sector confirmed the sharp drop in the number of events and conferences occasioned by election uncertainties, lower room occupancy rate and the recent emergence of new entrants into the sector were largely responsible for slower patronage recorded in the sector at this time.

“The building and construction industry confirmed that election spending, delayed payment of contractors, weaker demand for real estate and increasing security challenges are issues that mostly affected their business and investing activities during the period,” LCCI said.
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LCCI said the BCI is a leading economic indicator designed to measure the degree of optimism on the state of the economy that business leaders are expressing through their activities of investing and spending, saying that decreasing business confidence is often a pointer to slowing economic activities because business owners are likely to decrease their investment.

“The more confident entrepreneurs and managers feel about the business environment, the more likely they are to make new investments, create job and impact the economy,” LCCI said.

The Chamber said the 1st quarter 2015 BCI survey covered 180 top business executives in 162 companies over the period from 6th to 23rd January, 2014 where only top decision makers such as owners, Chief Executive Officers (CEO), directors and top managers participated in the survey.

[ThisDay]

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