LCCI President, Mr. Goodie Ibru
By Crusoe Osagie
The Organised Private Sector (OPS) has again slammed the 2013 budget presented by President Goodluck Jonathan to the National Assembly for not having any clear monetary policy.
The OPS, speaking under the umbrella of Lagos Chamber of Commerce and Industry, stated that it would have been useful for the President to highlight the thrust of monetary policy, as this was critical to the realisation of inclusive growth and fiscal consolidation.
The LCCI President, Mr. Goodie Ibru, stated this at the third Quarter Press Conference of the Chamber on the state of the economy. According to him “the inclusion of a monetary policy in the 2013 budget is so much critical now that many businesses are facing severe challenges with regard to access and cost of credit.”
He pointed out that the banking system currently has zero tolerance for risk with collateral cover required for loans as high as 200 per cent, stressing that this was stifling private sector growth and the capacity of entrepreneurs to create jobs.
Ibru further described the situation as a negation of the objective of inclusive growth and a real threat to financial inter-mediation. “Additionally, the government is progressively crowding out the private sector in the credit market. These are fundamental issues that need to be addressed to stimulate growth and create jobs,” he said.
He said the private sector and government have a collective obligation to improve the investment environment, boost business confidence and promote private sector development.
“The Nigerian private sector has a crucial role to play in the recovery and transformation of our economy and the improvement in the welfare of our people. But for this to happen, the operating environment must improve significantly and in a sustainable manner,” he said.
On the overview of the business condition in the country in the third quarter, LCCI noted that there was credit squeeze and tight liquidity in the financial system, which made access to credit difficult and put pressure on interest rate.
Ibru observed that the economy was still characterised by general weak consumer demand affecting virtually all sectors.
He said that the recent incidents of flooding across the country took its toll on the economy, especially in the agric sector and construction industry, elaborating that it has slowed down the economies of the affected states, with spill over effects on the rest of the country.
He also remarked that the security situation in the country remains a major issue as this has worsened perception problems for the country and also weakened investors' confidence.
He said that the third quarter also witnessed incessant influx of cheap and substandard products, which has continued to pose serious problems for domestic industries. “In spite of reforms at the Ports, challenges of cargo clearing persisted at the Lagos ports. And many businesses experienced erosion of profit margin due to twin problems of escalating costs and dwindling,” he said.
The OPS decried government's high cost of borrowing, which stood at between 14-16 per cent as one of the highest globally, pointing out that the trend has reduced the attraction of banks to lend to entrepreneurs because also of the pressure it puts on interest rates and increased outflow of funds from the banking system to government coffers.
Ibru observed that the sustained weakness of the advanced economies and the spill over effects is fast spreading to other regions especially the emerging markets.
“We are worried about these developments because of the implications for crude oil demand and subsequent impact on prices and the revenue base of government. For an economy that is so heavily dependent on crude oil revenue, developments in the global economy are crucial to economic stability and sustainability”, he added.
The OPS however commended the remarkable inflow of Foreign Direct Investment (FDI), noting that the surge of Foreign Portfolio Investments induced by the proposed inclusion of Nigerian government bonds in the JP Morgan Global Bond Index for Emerging Markets (GBI-EM) also added pressure on short term interest rates, with an estimated over $300 billion inflow recorded in August alone.