The Lagos Chamber of Commerce and Industry (LCCI) has called for more support and incentives for vehicle assemblers this year to reduce their production costs.
In review of the 2017 economy, Muda Yusuf, director-general of the LCCI, says that many operators in the automotive sector lamented the high cost of vehicles which depressed sales, and profitability in 2017, adding that sales of new vehicles dropped from over 80,000 units per annum few years ago to less than 20, 000 units last year due to the operations of the Automotive Policy.
Yusuf says operators want an urgent review of the policy and reduction in import duty on vehicles owing to over 100 percent depreciation of the naira exchange rate over the last two years.
He says that for the country to sustain the present of recovery and achieve the growth forecast, the country must embark on aggressive investment in infrastructure to boost productivity in the economy, while reducing multiplicity of exchange rates. He stresses the need for alignment of procurement policies at all levels of government to support domestic investment, calling for an investment-friendly tax policy, and policies that will protect domestic investors and enforce low interest rate.
The chamber projects GDP growth of three to four percent 2018, oil price of around $50 per barrel, external reserve of $40 billion mark, and headline inflation of 13 percent.
“Current reforms in such critical sectors as power, agriculture, solid minerals and oil and gas should be sustained. The executive orders signed in May this year should be fully enforced to improve the way Government does business and thereby improve the business environment,” Yusuf says.
He states that the situation with the manufacturing sector in 2017 was that of a partial relief, especially with respect to access to foreign exchange, adding that manufacturers reported an improvement in the liquidity of the foreign exchange market.
“These enhanced their capacity to import raw materials and boosted capacity utilisation,” he points out.
He, however, recalls that manufacturers expressed concern with respect to high interest rate that was between 25-30 percent, dearth of long-term funds, infrastructure situation with respect to power, energy and logistics, as well as inflow of fake and sub-standard products.
Other challenges encountered by manufacturers last year, according to Yusuf, are weak patronage of locally produced goods, especially by government agencies and ministries; activities of the Federal Operations Unit (F.O.U) of the Nigeria Customs Service on their businesses, and indiscriminate valuation queries by the Nigeria Customs Service.
“The non-oil export sector was impacted positively by the depreciation in the naira exchange rate. This led to improved performance of the non-oil export sector even in the face of recession and the fragile economic recovery,” he submits.
According to him, investors in the export sector expressed the following concerns in the areas of high production cost, which affected competitiveness; poor road network, especially Apapa roads; and incursion of foreigners into the export of primary products and the consequent crowding out of domestic exporters.
“The Export Stimulation Fund promised by the CBN is yet to be made available to exporters. It is believed that the release of this fund will have a major impact on the export sector. The fund is N550billion,” he states. Agricultural Sector
“The agriculture sector benefitted from the inward-looking disposition which the recession created in the economy. In particular, the weak naira made imports more expensive and local products more competitive,” he further states.
He, however, says that the sector was grappled with a number of challenges which constrained its growth in 2017, including acute scarcity of parent stock for turkey which severely constrained the capacity of poultry owners to expand the production of live turkey.
Other challenges faced by farmers included high cost of vaccines and micro nutrients for the production of fishmeal and other livestock feeds; and multiple government agencies, posing problems for importers of agricultural inputs at Lagos ports.
“Investors in the sector could not access foreign exchange at the official rate of N305 to the dollar,” he states.
Poor access to the ports due to bad state of the roads and absence of functioning rail had multifarious effects on the private sector, economy and the citizens, according to the chamber.
The LCCI says that ports users faced daunting challenges in 2017, leading to risk to the lives of citizens arising from containers falling off the trucks as a result of bad roads; congestion at the ports resulting from the delay in the evacuation of cargoes; high demurrage paid by importers to terminal operators and shipping companies as a result of delay in the clearance and evacuation of cargo in the ports, and high cost of transportation for evacuating cargo because of the prolonged engagement of the trucks by importers arising from the delays.
“There were also delays in getting raw materials and other inputs from the ports to the factory premises in Lagos and other parts of the country,” he adds.
“The power situation continues to pose severe challenges to business operators. There were concerns across sectors about high energy costs especially high expenditure on diesel, cost and availability of gas. These continue to impact on the bottom line of investors especially those in the real sector. SMEs and some processing companies reported that they spend as much as 20-25 percent of their total operating cost on provision of alternative power supply and payment to DisCos,” he says.