Economic transformation dependent on investment climate – LCCI
December, 2011 by Sodiq Oyeleke
The Lagos State Chamber of Commerce and Industry, Nigeria’s foremost chamber and advocacy group, has said that the transformation of the Nigerian economy is critically dependent on the quality of investment climate in the land.
The body stated this in its end-of-the-year economic outlook, titled, “The 2011 Report on the Business Environment in Nigeria.” It was made available to our correspondent in Lagos on Wednesday.
Explaining the rationale behind the submission, the chamber, in the report signed by its Director-General, Mr. Muda Yussuf, said it undertook an evidence-based assessment of the business environment, with inputs from its members and stakeholders in the Nigerian economy, before arriving at the positions presented.
According to the LCCI, the evidence-based review of the business environment revealed two major categories of challenges.
It said one of the challenges faced by the business environment was the high cost of power supply, which reduced the profit margin of many firms in the year under review.
It said, “Firms reported that the most critical problem faced in 2011 was the unbearable energy cost, which was a consequence of the appalling state of the power sector. The escalating cost of diesel, LPFO, aviation fuel and gas reflects this reality. The outcome was that profit margins of many firms were considerably eroded and the survival of many businesses was put at risk.”
It also noted that high cost of inputs, especially imported raw materials, machinery and equipment, posed additional challenges.
“Some firms complained about the volatility of the exchange rate and the challenges it posed for business operations, especially planning. High import duty, Value Added Tax and ports charges are other challenges, all of which are percentages of cost of imports,” it said.
It lamented the multiplicity of agencies at the ports; the tedious bureaucracy in documentation and rampant extortion, “giving respondents an awful and frustrating experience in the course of cargo clearance.”
The chamber added, “It takes an average of two to four weeks to clear cargoes at the ports. These had implications on the cost of borrowed funds, which were used for the importation, and demurrage charges, among others.”
It also said that firms experienced weak consumer demand, resulting in low patronage for many sectors and high consumer resistance.
“There were indications of significant contraction in aggregate demand and a deceleration in the tempo of economic activities during the year. These adversely affected investors,” it said.
According to the chamber, the industry was also faced with some sectoral challenges, including the shortage of manpower and smuggling, which slows the pace of its activities.
“Firms in professional services and construction industry reported declining quality of skills in the economy. Many formal sector businesses in the distributive trade sector lamented the rampant smuggling by informal sector operatives which created competitiveness challenges,” it lamented
Written by NEWSTRAWL ONLINE UPDATE
Sodiq Oyeleke is a Media, Human Resources, Project Management and Public Relations Practitioner
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