Organised Private Sector in the country, has been said to have lost about N1.46 trillion in the last six months, following Federal Government’s policy on foreign exchange restriction, a development which has stalled business activities due to paucity of forex, the Lagos Chamber of Commerce and Industry (LCCI) has said.
Reviewing the state of the nation’s economy and business review for 2015 and perspectives for 2016, in Lagos at the weekend, the Director-General, LCCI, Muda Yusuf, said that the year 2015 would go down in history as the most challenging year for the private sector operators in the country due to the utmost difficulties faced in the harsh business environment.
Yusuf said that if measures were not taken to cushion the multiplier effects of the drastic fall in oil price (currently at $35 per barrel), heavy fuel subsidy bill nearing N1 trillion in 2015, wide spread insolvency among state government across the country, increasing sovereign debt (about $60 billion, including debt provisions in 2016 MTEF) and debt service obligation of N1.3trillion in 2016, the financial crisis may linger into the New Year, warning that this may cripple the smooth operation of the Federal Government in running the country’s economy in 2016.
He said that the unfriendly business environment continued to undermine the capacity of investors to maximise abundant business opportunities in Nigeria, stating that equity market lost over 30 per cent in market capitalisation, making the Nigerian Stock Exchange (NSE) one of the worst performing equity markets in the world in 2015.
According to him, the percentage drop could be attributed to the depressed international oil market; exchange rate crisis and fears coming from slowing Chinese economy, which consequently induced negative pressure on the equity market.
He said: “The year 2015 was challenging as the difficulties in the business environment persisted, especially in relation to insecurity in parts of the country, infrastructural conditions, foreign exchange crisis, funding issues, consistency of policy and the quality of institutions. There was also the challenge of uncertainties and risks created by the political transition and the elections.”
The LCCI DG stressed that the National Bureau of Statistics (NBS) revealed that Nigeria’s real Gross Domestic Product (GDP) fell to 2.84 per cent in the 3rd quarter of 2015, compared to 6.23 per cent in the same period in 2014.
He said that sectors such as manufacturing and the services slipped into recession after recording successive declines over the last three quarters in 2015.
On CBN activities in the year under review, Yusuf said that Nigeria had increasingly drifted into economic and financial crisis following series of adverse developments in the international oil market.
In response to dwindling receipts from oil export, the Central Bank of Nigeria (CBN) adopted several measures such as the closure of Retail Dutch Auction System (RDAS) window, restriction of cash payment into domiciliary accounts and prohibition of 41 items from accessing the interbank foreign exchange market.
“CBN’s administrative allocation of foreign exchange signposted much deeper challenges for investors and the economy. As at 18th December, 2015, premium at the parallel market reached a record level of 35 per cent against the official exchange rate as the naira crashed further to 270/$ in the parallel market. The CBN, in an attempt to arrest the trend, blamed the development on the activities of speculators in the parallel forex market, thus pushing for stricter restrictions,” he said.