Lack of access to credit, policy inconsistencies, infrastructural deficiencies and corruption have been identified as major constraints to doing business in Nigeria.
This was revealed from a business confidence survey carried out on the Nigerian economy by the NOI Polls in partnership with the Nigerian Economic Summit Group (NESG) for the fourth quarter of year 2009, conducted in public and private owned companies selected across various fields of the Nigerian economy.
The sectors include banking, insurance, transport, oil and gas, agriculture, manufacturing, consulting, telecommunications, aviation, among others. Specifically, the survey, according to the NOI Polls, which works closely with Gallup Poll (USA) and the NESG, was conducted through interviews and questionnaires distributed to some top business executives.
The survey showed that 67 per cent of the respondents said lack of infrastructure, 50 per cent said access to credit, while 50 per cent said policy inconsistency was the obstacle to business and 47 per cent said corruption. Also, 90 per cent of the respondents noted that their businesses were hindered by power, 86 per cent said major hiccups from ports, 76 per cent said petrol/diesel supply and 67 per cent said insecurity was a major constraint to growth. The manufacturing and services sector said power was a major constraint for the businesses, as they had to generate their own supply.
The survey stated that though the global economy showed a remarkable resilience in its efforts to recover from the economic crisis, which started in 2007, with evident signs of an upturn in major industrialised economies, which manifested in slower rates of output decline and even marginal growth in some economies, but in Nigeria, the macroeconomic environment continued to deteriorate.
The survey in relation to other parts of the world showed that U.S. Gross Domestic Product (GDP) grew by 3.5 per cent in quarter three of 2009, from 0.7 per cent contraction in quarter two; UK contracted from 5.5 per cent in quarter two to 5.2 per cent; while the Eurozone declined by 4.1 per cent in quarter three, from 4.8 per cent in quarter two. According to survey, these improvements were largely due to the injection of liquidity into the financial system and other stimulus programmes adopted by governments around the world.
But the Central Bank of Nigeria (CBN)-induced banking reforms, which resulted in a near total freeze on credit expansion, caused a slowdown in economic activity in the period under review, coupled with the low level of electricity generation, increased focus on taxation, enhanced government borrowing, reduction in spending, business closures and massive job losses (particularly in the banking sector), all combined to put further strain on Nigeria’s dismal economic output.
The NOI Polls survey noted that the correction in the Nigerian stock market, which began in 2008, continued in 2009, despite regulatory interventions and was further compounded by the liquidity squeeze and dampened investors’ appetite for equities, which resulted in the stock market losing 39.5 per cent of its capitalisation. It added that despite concerted efforts by regulators to restore domestic confidence, inject new liquidity into the banking system, interest rates (measured by inter-bank, prime and maximum lending rates) remained ascendant.
However, the survey showed that the foreign exchange market remained relatively stable for the most part of 2009, after an initial turbulence in the first quarter, following measures taken by the CBN. It stressed that as at end-December 2009, the Whole Dutch Auction System (WDAS) average exchange rate was N149.6 to a U.S. dollar compared with N126.48 per dollar at end of December 2008.
The survey puts it that in the next six months counting from January, 2010, 43 per cent of those interviewed sees their business remaining the same, while 30 per cent and 23 per cent sees their business becoming better and worse respectively. Furthermore, the NOI Polls survey showed that majority of respondents (80 per cent) said the business environment was either unsupportive or very unsupportive of their businesses, stressing that the recent reforms in the banking sector, access to credit was either tight or very tight for most business executives but that in the next six months, from January 2010, access would be average and easy.
In the areas of corruption as a hindrance to business growth in Nigeria, the survey showed that 53 per cent of the respondent said they made unofficial payments to government officials in the past six months prior to the conduct of the survey. In the area of inflation, 53 per cent of the respondents said they envisaged increase in inflation rate, while 40 per cent said they did not anticipate any changes, but seven per cent expected a decrease. A major reason cited for the expected increase in inflation was the planned deregulation of petroleum products prices.