“If the economy must grow at the least desired rate in the subsequent quarter key issues must be fixed.”
The Lagos Chamber of Commerce and Industry, LCCI, on Wednesday blamed the poor performance of most of its members in the second quarter to uncertainties in the business environment.
The LCCI’s President, Aderemi Bello, who stated this in Lagos, identified some of the major factors that contributed to this to include epileptic power supply, security challenges and lack of access to credit.
Mr. Bello said these were the major challenges that stifled investment and growth in the second quarter.
He said the Chamber’s 2014 Business Environment Survey had revealed that key sectors in the economy, like construction, agriculture, manufacturing, oil and gas experienced poor growth.
“Manufacturers, especially SMEs (small and medium enterprises), still have major challenges as sticky access to credit, influx of fake and substandard products, regulatory infractions, and worsening power supply,” he said.
The building and construction industry, he pointed out, confirmed that the new policy on the grade of cement, poor credit conditions, and delayed payment of contractors were the major issues that affected 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.
He said there was need for government investment in vocational and technical education, as some of the issues raised by the operators included dearth of skilled workforce.
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.
Other challenges included monetary policy tightening by the Central Bank of Nigeria, CBN, which pushed up the cost of fund; risk asset provisioning requirements of the CBN, which poses as a disincentive to lending.
Equally, the capacity of banks to analyse credit remained very weak, particularly in the entertainment, agriculture, non-oil exports, and oil and gas sectors.
With cost of fund generally between 20 to 30 per cent, he noted that not many businesses could generate turnover to match this huge cost, adding that this condition was compounded by the fact that government treasury bills and bonds returned between 11 to 15 per cent, signifying 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,” he said.
He said it was also dependent on affordable finance of between 25 to 35 per cent cost of fund to investors, creation of sound infrastructure like power and transportation.
If the economy must grow at the least desired rate in the subsequent quarter, he said a lot needs to be done to fix the key issues.
The Chamber urged stakeholders in the political space to manage the transition programme delicately to boost the growth of the economy which seriously includes the cost of doing business and job creation.