Business

Real sector outlook still gloomy

Last Friday, Nigeria celebrated her 61st independence as a nation. Amid the pomp, members of the organised private sector (OPS), in their usual style, reviewed the performance of the country’s real sector since 1960, saying it has been mixed feelings, gloomy outlook with numerous challenges still facing the sector. TAIWO HASSAN reports

No doubt, the first 61 years of Nigeria’s independence has seen her economy transform from a basically agrarian to one driven largely by resources from oil and gas and non-oil sectors. President Muhammadu Buhari, in his Independence Day speech to the nation, said: “As we continue to optimise and enhance our oil and gas sector, I am also proud and delighted to state that our economic diversification strategy remains on course with the persistent increase in non-oil sector’s contribution to GDP. However, there is no doubt that the non-oil sector has demonstrated the capacity to be the live wire of Nigeria’s economy, 61 years on. Only that challenges have hindered the growth of its contribution to the country’s GDP.

The real sector

Over the last few decades, the challenges of production, especially in the manufacturing sector, had grown progressively, largely because of the quality of infrastructure in place, which is why the risk of industrial investment is high and continues to increase. The various policy interventions have not had the desired impact on the sector. Unless there is an effective and sustained protection and support for the sector and a dramatic improvement in infrastructure, the outlook for the sector would remain gloomy, particularly for the small-scale industries. It is impossible to have a vibrant manufacturing sector in the face of cheap imports into the country and high production and operating cost in the domestic economy. Some of these imports are landing at 50 per cent of the cost of products produced locally. Besides, manufacturers have to worry about high energy cost; they have to worry about high interest rates – 20 per cent and above; they have to worry about a multitude of regulatory agencies making different demands on them; they have to worry about massive smuggling and under invoicing of imports, they worry about trade facilitation issues at the sea ports and many more. For most manufacturing SMEs, it is a nightmare. Yet production is critical to an enduring economic and social stability.

NACCIMA’s views

In his reaction to Nigeria’s 61st independence celebration and impacts on the country’s economy, the National President, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Ide John C Udeagbala, explained that celebrating Nigeria at 61 comes with mixed feelings that the country is still facing numerous challenges on all fronts. According to him, a few highlights from relevant statistics showed that GDP per capita increased steadily from independence and reached a peak of about $1,800 on average between 1976 and 1979, then began to decline, showing a significant drop during and after the implementation of the Structural Adjustment Pro-gramme (SAP) in the 1980s.

The NACCIMA national president continued that relevant statistics would also show that the highest annual growth rate of Nigeria’s GDP per capita occurred between 1999 and 2007, perhaps reflecting the positive effect of democracy on the economic growth. Udeagbala said: “However, the last decade has been tough. After two economic recessions and a global pandemic within the last decade, the Nigerian economy today faces high inflation rate, high unemployment rate, low growth rate, mounting local and foreign debt and a depreciating currency, while still largely being import-dependent.”

However, he pointed out that Nigerian economic growth since independence remains positive with the potential to match the most developed economies in the world. “My view on the various developments plans of the Nigerian government since 1960 is that we have created, over time, development plans that can rival the best in the world.

“The First National Development Plan (1962-1968), the Second National Development Plan (1970-1974), the Third National development Plan (1975-1980), the Fourth National Development Plan (1981-1985), the Perspective Plans (1986-1990), the Rolling Plans (1990 – 1998), the National Economic Empowerment and Development Strategy (NEEDS, 2003 – 2007), the Vision 20:2020, and the Economic Recovery and Growth Plan (2017-2020), all of which have great merit from the scholastic point of view, leading to the firm opinion by myself and most of the general populace that Nigeria’s issues are not with planning.

“The current state of the economy is partly as a result of two main characteristics of various policies. Either the policy design and implementation commences too late or its positive effective is counteracted by the design and implementation of a different policy. “An example of the first is the length of time between the impacts of the lockdown measures of COVID-19 on the Nigerian private sector, the time elapsed before the announcement of the Economic Sustainability Plan (ESP), and yet more time passing before the implementation of the initiatives of the plan. “An example of the second is the current implementation of policies in the foreign exchange market that totally negate any benefits or relief that may have been obtained by the implementation of the ESP,” Udeagbala added.

LCCI’s position

In her own views, the Director- General of the Lagos Chamber of Commerce and industry (LCCI), Dr. Chinyere Almona, explained that the 2021 second quarter GDP data showing that the non-oil sector accounted for 92.58 per cent of the GDP while the oil sector accounted for 7.42 per cent, with over 50 per cent of the nation’s revenue and over 80 per cent of the foreign exchange earnings was a reflection of the mounting imbalance in the structure of the economy since independence. According to her, it also underscores the growing decline in the non-oil sector productivity over the past 61 years.

This remains the major failing of the Nigerian economy at 61. It makes the economy very vulnerable to global shocks and weak in economic inclusion. She said, however, that the 22 years of uninterrupted democracy in Nigeria had earned the country enormous goodwill as one of the few stable democracies in Africa.

However, Almona pointed out that core democratic values and ideals were yet to take firm root, especially in the following respects: transparency in the management of public finance, rule of law, separation of powers and the inherent checks and balances, quality and independence of democratic institutions, etc. According to her, “LCCI recognises that Nigerian democracy is still a work in progress. However, as in many advanced democracies, it is crucial to recognise the importance of these democratic ideals to sustain our democracy and ensure the advancement of the common good for all citizens. And very recently, a mixed colouration of insecurity, border clashes, herdsmen/farmers clashes, banditry, kidnapping and social unrest have all emerged as critical threats to our national life.”

To her, the quality of the business environment remains a source of concern to investors, especially in the real sector. Weak infrastructure, policy environment, and institutions had adverse effects on the efficiency, productivity, and competitiveness of many enterprises in the economy. These conditions pose a major risk to job creation and economic inclusion across sectors.

Last line

As Nigeria clocks 61, the OPS and investing business community are saying that there is an urgent need to address the weak government revenue base, rising and unsustainable debt profile, over-dependence on oil revenue, exposure to foreign shocks through weak forex supply and double-digit inflation, among others, in order to guarantee optimum GDP growth.

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