Low business activities in Nigeria...traders bemoan fate

Emeka Ibemere

Despite the new change of leadership in Nigeria’s political stratum and with high expectations among Nigerians that the new government would ‘hit the ground-running’, business activities seems to have hit rock, and slowed down economic activities.

 President Muhammadu Buhari came to power in March on a promise of change and anti-corruption campaign ticket and was sworn in on May 29.

One month after taking over power, business activities and other things in the polity seems to be crawling forcing critics to start agitating for action as promised to them by the President ahead of 2015 election.

 The Peoples Democratic Party said that after a careful evaluation of the first 30 days of President Muhammadu Buhari and All Progressives Congress administration, it has become obvious that Nigerians need to join hands in prayers to save the government from further inaction and dithering.

PDP said their call for prayers was necessary given the fact that the administration is finding it difficult to locate its bearing and even take off and face the challenges of governance at the center resulting in 30 days of all motion and no movement, a scenario that does not augur well for the polity.

Olisa Metuh, the PDP National Publicity Secretary in a statement on said that the enormity of the confusion surrounding the government and party in the last one month makes it imperative for Nigerians to pray as the success or failure of the Buhari administration will not only affect the President and his party but also the entire nation.

“We urge Nigerians to join hands in prayers and offer useful suggestions to President Muhammadu Buhari and the APC because with what we have seen in the last 30 days, the present administration is finding it very difficult to get its bearings right while showing no inclination towards implementing its numerous campaign promises for which they were voted into office at the center.”, he added

“We are deeply worried that the President, who promised to unveil his cabinet two weeks after his inauguration, has not been able to decide on key appointments such as ministers, Secretary to the Government of the Federation (SGF), a Chief of Staff and advisers in key sectors of the economy.

“This is more so as the delay has brought government business in ministries, departments and agencies to a dangerous standstill with coordination of important policies vested on ministers and the SGF now in tatters while the system drifts. This situation also creates loopholes through which overzealous persons around that President can connive with unscrupulous elements in the bureaucracy to siphon public resources in addition to possibly misleading the President to violate due process by spending beyond and outside his statutory limits.

“The situation is taking its toll on the economy sector, which has in the 30 days witnessed unprecedented decline with a terrifying crippling of foreign and domestic investments including activities in the money and capital market sectors. Under President Buhari, the stock market has lost over N238 billion while the All-Share Index fell by 849.87 basis points as at June 19”.

“Finally, while we remind the President and the APC that their campaign promises are bonds which must be fulfilled, we urge him to use the next ten days to set up his government by naming his ministers, the SGF and advisers in critical sectors as Nigerians did not vote for a sole administrator but for a democratic government”. Why ministers for Africa's biggest economy have yet to be unveiled a month after he came into power”.

Even with the inauguration of the National Economic Council, a presidential advisory group that met last week for the first time since Buhari was inaugurated, said the NNPC had kept nearly half Nigeria's oil revenues from 2012 to May 2015 and promised an investigation.

Yvonne Mhango, sub-Saharan Africa economist at Renaissance Capital, said the uncertainty was exacerbating jitters about the outlook for an economy battered by depressed oil prices. "We hope we'll get clarity on what sort of policies we should expect and investors can make decisions on the back of that," Mhango said.

Economic experts said delay in the President to appoint his cabinet is slowing business activities in Nigeria. If the reports reaching Nigerians that the President Buhari's cabinet won't be ready until early September, because he was not in a hurry is sparking up tension in the business circles and corporate world.

 The tension is brewing up by the fact that nobody knows the economic policy of the new regime. According to experts, foreign investors may decide to cross fingers and watch things unfold considering holding-action of the president on his ministerial appointment which would still continue to stifle business activities till September. Adebukola Joseph, a businessman said things would likely normalise by next year, March if there would be any improvement and asked Nigerians to exercise patience.

This is contrary to the expectations of Nigerians who felt the incoming president would turnaround the Nigerian economy contrary to huge success after the general election, which saw the collapse of everything during election.

Reports say three major drivers of the holding-action are the energy crises, the spill-over effect on the financial sector and the overall investment policy outlook of the in-coming regime of Muhammadu Buhari.

According to analysts, things are already taking toll on the financial sector especially the stock market, while the banks are all at high risk.

As if Adebukola Joseph was in the minds of  a foreign investment group in Nigerian economy, known as Renaissance Capital, the organisation indicated that 2015 may end up as a ‘lost year’ to Nigerian economy going by the uncertainties in the future direction of the economic policy as new government takes over this week.

Renaissance Capital said Nigerian consumer stocks would struggling through a “lost year” as a slump in oil prices buffets Africa’s largest economy.

“Fuel shortages have returned and are making it harder to distribute goods as companies including Guinness Nigeria Plc, Nestle Nigeria Plc, and Unilever Nigeria Plc grapple with a slowing economy and weaker local currency”, Benjamin Samuels, head of equities at the Renaissance Capital which focuses on emerging markets, said.

According to him, investors would turn away from the country’s banks until there’s more clarity on how they’re responding to the risk of higher defaults because of lower crude prices.

“Some see 2015 as a lost year for growth and margins. Companies are facing “challenges around distribution and weaker sales,” he added.

Both formal and informal sectors’ economic growth in Nigeria witnessed slowed business in the last six months as the oil industry contracted amid a slump in prices.

 The National Bureau of Statistics (NBS) reports that expansion in gross domestic product (GDP) eased on an annual basis to 4.0 percent in the first quarter 2015 compared with 5.9 percent in the last quarter of 2014.

“The oil industry represented 10.5 percent of the country’s first-quarter GDP, rising from 9 percent in the three months through December 2014, the statistics agency said. Non-oil growth was 5.6 percent in the first quarter 2015, compared with 6.4 percent in the fourth quarter of last year.

“The economy is presently struggling to cope with an almost 40 percent decline in oil prices over the past year, sales of which provide about 80 per cent of the national revenue. The Naira has lost 13 percent of its value against the dollar in the past six months, driving the rate of inflation to a 21-month high of 8.7 percent in April 2015”, the statistics agency said.

Some blue chip stocks which are mostly the targets of foreign portfolio investors (FPIs) are already at the receiving end of the investors’ apathy. Nestlé’s net income fell 51 percent to N2.95 billion Naira in the first quarter 2015 from a year earlier. The stock has lost 18 percent in the last 12 months, while Guinness’s shares are down 11 percent and Unilever’s 8.2 percent.

 Renaissance Capital stated that, “Some consumer names are trading at 20 to 30 times earnings. “They’re not cheap. If you’re buying a stock with a high price to earnings ratio, you’re likely taking a bet on 2016 and 2017″ a long term position most FPIs are not ready to take now.

Chukwudi Nwosu decried the slow business activities and non-payment of workers’ salaries as one of the things slowing business activities and asked the President to do something with his cabinet. Mrs Ake blamed the crisis in the National Assembly as one of the reasons why Buhari has not submitted his cabinet list and said all those things are forcing down demands and supply thereby affecting business.