Investors Wary of Nigeria’s Hostile Business Environment- LCCI

Investors and business leaders are still wary about the state of Nigerian economy and the unfriendly business environment, according to the latest Business Confidence Index (BCI) of the Lagos Chamber of Commerce and Industry (LCCI)

BCI is a leading economic indicator designed to measure the degree of optimism on the state of the economy that business leaders are expressing through their investment disposition.

According to the  BCI by LCCI for the second quarter of 2013, the business environment in the country has remained very unfriendly, adding that the environment remains largely constrained by rising socio-economic uncertainties which have kept the BCI scores trailing far below the global optimum levels.

The LCCI  said though the country recorded a modest improvement of 16.5 per cent from the 10.5 per cent it achieved in Q1 2013

The report said the growth represents a six point movement of the index along a positive trajectory and that the improvement notwithstanding, BCI scores for Q1 and Q2, 2013 continues to trail far below the 50 per cent global confidence threshold.

“The factors that weakened the index score includes: poor access to credit, inhibitive tendencies of monitoring and regulatory agencies, sustained insecurity situation across the country, dwindling public power supply and budget approval/implementation crisis.

“Macroeconomic factors such as exchange rate and inflation rate exerted neutral influence on the Q2, 2013 BCI score. The neutral impact of macroeconomic prices on businesses at this time is informed by the relative stability achieved over the last few months,” LCCI said.

However, it said the downside remains the current stabilisation of prices through monetary tightening which has been achieved at the expense of investment, employment, output and growth.

The report said the real sectors – agriculture, manufacturing and solid mineral reversed the negative confidence they posted in Q1, 2013 survey by joining other sectors on the positive confidence trajectory, adding “notwithstanding, the real sectors remains at the bottom leader with very low confidence levels at seven per cent, five per cent and two per cent scores respectively.

Also the report said hotel/restaurant, IT/telecoms, finance and professional services sectors continues to lead the sectors with the highest confidence levels at 35 per cent, 27 per cent, 21 per cent and 17 per cent respectively.

On regional BCI, the LCCI said businesses located in the South West are the most confident with BCI score of 38 per cent, followed by companies operating in the South East and South South with BCI score of 29 per cent and 19 per cent respectively.

“Expectedly, businesses located in North East, North West and North Central sustained negative confidence at BCI score of -2 per cent, -1.5 per cent and -0.1 per cent respectively.

“While we note the resilience of businesses operating in the southern Nigeria for keeping up amid increasing threats, the worsening security situation may have caused severe setback to businesses and potential investment particularly in the North and the country in general,” the report stated.

The chamber said with the progress made so far on the privatisation of the nation’s power sector, the commencement of the implementation of the 2013 budget across the states and the federation, and the new momentum given to the consideration of the Petroleum Industry Bill, PIB, by the National Assembly, if sustained would affect the outcome of Q3 BCI.