Tuesday, 14 August 2012

No respite for businesses as facilities, conditions worsen

• Budget planning, implementation ridiculous, say experts
THE unenviable profile of Nigeria’s business environment has again been adjudged to be worsening by business operators and other stakeholders, who reacted to last week’s World Bank’s poor rating of productivity of Nigerian companies.

In their conclusions, the industry players asserted that the impediments had now gone beyond the well-known parlous infrastructure saga.

The analysts and sector operators in separate interviews with The Guardian posited that the phenomenal tardy budget implementation, especially by the Federal Government, had accentuated growth-retarding features of the economy.

Besides the poor budget implementation saga, they said that harsh credit conditions, such as high cost of funds, poor access to bank facilities and unfavourable loan tenures, had combined with lingering parlous infrastructure, high level corruption, poor port operations and dearth of data for operations to make the country’s business environment a phenomenal nightmare.

The World Bank in its 2011 Investment Climate Assessment Report on Nigeria had rated productivity by the country’s companies in relation to labour and capital output as low.

The Nigerian Governors’ Forum (NGF), lending credence to the World Bank’s report, described the prospects of small and medium enterprises under the present operating regime as bleak, with access and cost of finance remaining difficult and hostile to environment.

The Lagos Chamber of Commerce and Industry (LCCI) said the structure of the national budget could not support the delivery of desired infrastructure for business growth, as it is heavily skewed in favour of recurrent expenditures.

The LCCI Director-General, Muda Yusuf, noted that even the meagre allocation to capital projects had become a big issue, due to late budget presentation. Citing the 2012 budget, Yusuf said it only came to light in April, adding that “there is also the challenge of capacity to manage the capital projects due to high corruption content in their implementation processes.

“It is a matter for concern that the structure of budgets at all levels of government is yet to address the grave infrastructure deficit situation in the economy.  Unless this is done, productivity in the economy will remain low, the capacity to create jobs will continue to be weak and the unemployment challenge may escalate with the attendant consequences.”

To the ActionAid Nigeria, the “system of Nigeria’s budget does not make it implementable,” thereby making the expenditure plan to lack the necessary support for businesses.

The organisation’s Country Director, Hussain Abdu, explained that “the budgets are not informed by any research decision, that is why allocations are given before they are evaluated. The way the budgets are structured, no reasonable thing can be achieved in terms of implementation, and that is where the challenge is. It is not just that the executive arm does not want to implement the budget, it has to do with the system.”

Corruption, he added, had plagued Nigeria’s efforts at meeting the Millennium Development Goals (MDGs).

“Ours is one of the most corrupt countries in the world and the level of graft is so palpable. You can feel it on both sides; from the side of the people that are stealing the money and from the side of the people that have actually been affected by the ongoing looting of the treasury.”

He said the character of the government is not development-oriented, claiming that the system is structured not to be responsive to development issues.

Yusuf said that beyond budget implementation challenge, infrastructure conditions, especially power and transportation, had continued to assail business operations in the country.

Also, besides harsh credit conditions, especially the cost of credit, access to facilities and the tenure of funds, government agencies – regulatory institutions, local councils, tax authorities and the bureaucracy – could be a major source of irritation to investors. Functions are often duplicated; charges and fees are outrageous, making compliance difficult, especially for SMEs.

Ports situation, especially the outrageous charges by terminal operators and shipping companies and extortion by some agencies, have impacted negatively on business.

Owing to high operating cost, market access is a big issue for many firms. Nigeria is a big market, but over 80 per cent of the products in the markets are imported.  This is one reason the robust market have little impact on welfare and jobs, the analysts stated.

According to them, ethical issues are prevalent in the distributive trade sector, dominated by informal sector players.  The incidence of duty evasion, smuggling, faking, counterfeiting and importation of substandard products is rampant.  These create the problem of unfair competition.

They did not spare the monetary tightening policy of the CBN, which the analysts noted had exacerbated the problem of cost and access to credit.

“The magnitude and cost of government borrowing continues to crowd out the private sector, putting the financial intermediation role of banks at risk.  Government policy on the patronage of locally-produced goods is more in the realm of rhetoric than action,” Yusuf said.

A past president of the Institute of Chartered Accountants of Nigeria (ICAN), Emmanuel Ijewere, said lack of information to operators for effective operations for their respective businesses had remained a major challenge to business growth in the country.

“But I will also say that a major impediment is limited access to funding, especially for start-up operation of businesses, as the facilities available in the financial institutions are not long-term.”

In agriculture, which requires long-term funding, Ijewere lamented that getting the support of the financial institutions was elusive because most of them don’t understand the needs of the sector, let alone addressing them.

“Again, the private sector appears not to be united enough to present a common front in tackling these problems. This situation is being exploited by the government to enthrone growth-retarding policies for the sector operators,” he added.

Economist and pioneer Executive Director of Manufacturers Association of Nigeria (MAN), Dr. Uma Eleazu, stressed the need for proper co-ordination of fiscal policy with industrial sector’s needs to achieve desired economic diversification and growth.

Eleazu, who is the Managing Director of Smenet Africa Limited, said there is a disconnect between policy direction and required provisions for business growth in the country.

Besides, he said policy somersault, being experienced in the economy over the years, has engendered non-sustenance of good projects and initiatives.

“For instance, in the ’80s, we built dams, adequate enough to irrigate substantial acres of farmland in the North. But there is no sustenance of the project in terms of maintenance, to the extent that the situation has now deteriorated.”

An Abuja-based development consultant, Mr. Jide Ojo, who lent credence to the World Bank report on Nigeria’s investment climate, advised the government to address the issue of security.

“Nigeria has Bank of Industry (BoI) and Agricultural and Cooperative Bank (ACB), yet access to finance has been problematic. The entire lending process and procedures need to be simplified. We must also combat corruption not by paying lip service, but by effectively prosecuting corrupt elements in our society,” Ojo said.

Next >
Author of this article: By Ade Ogidan, Bukky Olajide (Lagos) and Emeka Anuforo (Abuja)

No comments:

Post a Comment