Following persistent economic depression in the country, Nigeria’s business communities and investors have blamed the volatilities in the Nigerian capital market on poor economic policies.
Expectedly, key economic indicators revealed that the manufacturing and financial sectors are struggling for survival, while corporate Nigeria, the main drivers of economic growth, has suffered tremendous neglect since the advent of the President Muhammadu Buhari administration on May, 29 2015.
Some economics experts who spoke with The Point, explained that: apart from the administration’s obvious sidetracking of the business community in economic and business matters, many of its policies have also impacted negatively on all other sectors.
The Director General of Lagos Chambers of Commerce and Industry, Dr. Muda Yusuf, blamed some of the problems the nation is going through, on the current administration’s slow start in building the economy. According to Yusuf, absence of an economic blueprint was one of the concerns of the private sector in the early days of the administration.
Yusuf said that the manufacturing sector experienced some major challenges during the past three years of the current administration. “The factors were both external and domestic. The main external factor was the collapse of oil price which affected forex availability and triggered sharp exchange rate depreciation. There was very little the government could do to stem that.
He explained that, the policy component of the problem resulted largely from lack of support, foreign exchange policy choices which aggravated the problem of forex liquidity. The high interest rate and unfair competition from imported products were also factors that constrained the growth of the industrial sector. High energy cost continued to impede the competitiveness of the sector. Capacity utilization was between 40 – 45 per cent over these periods.
“The good news is that segments of the manufacturing sector that had substantial backward integration capabilities had a very good leverage during the review period. Such firms became more competitive and more sustainable and profitable. They are largely in the food and beverage categories” he said.
The LCCI boss said the agriculture sector, however, gained government support especially in funding for rice farming and processing. “However, the pace of mechanization, which can only be handled by the private sector, is still low which was why food prices remain an issue in the country. It is only mechanized agriculture that would guarantee food security in a country with a population of over 180 million”.
Reacting to the development, an economic analyst, Mr. Johnson Ogunseye, said that the key economic reforms, especially in respect of the petroleum industry and the infrastructure sectors were also slow, adding that the good news is that the outlook for the short to medium term looks better now than a year ago. “The Economic Recovery and Growth Plan launched recently by the President had provided clearer economic policy direction of the administration. This has improved the level of investors’ confidence and lessened uncertainties”.
Ogunseye noted that owing to the president’s annoyance with Corporate Nigeria for its perceived involvement with corrupt politicians to loot the nation’s recourses, the president had severally sidetracked the business community while taking important economic decisions, to the detriment of the nation.
According to Trading Economics, a worldwide reference site for economic data and financial markets and the World Bank Bi-annual Economic Update, the rate of unemployment in Nigeria increased steadily throughout 2017, whilst unemployment statistics for Quarter 1 in 2019 stood above 15.42 per cent.
The Managing Director of Financial Derivatives Company Limited, Mr. Bismarck Rewane, warned that due to the geometric rise in unemployment and underemployment, unemployment rates could rise to 21.5 per cent in the near future. .
He said, while the rate of unemployment has continued to get worse, consumer price index also rose to a dangerous level, before it bottomed. The naira was devalued from N197 per dollar to N360 per dollar.
According to the Manufacturers Association of Nigeria, 272 manufacturing firms closed down in Nigeria from 2015 to 2016. While the investment climate has considerably improved, more companies have downscaled or shut down out rightly, the unfavorable business climate and policies also had a damaging effect on investor’s confidence with many foreign firms fleeing to safety.
