A look back at Nigerian economy in 2018

Business News
“The regulatory environment was a major source of distraction for many corporates during the outgoing year.”
By Babatunde Ruwase, President LCCI
“I am delighted to welcome you all to the 130th Annual General Meeting of the Lagos Chamber of Commerce and Industry (LCCI).
The outgoing year was characterized by numerous opportunities, achievements and challenges.
In all, it has been a very eventful year for our chamber.
However, as investors, we had to contend with the usual constraints of the business environment. There was high interest rate, weak GDP Growth, weak consumer demand, traffic gridlock on Lagos port roads and insecurity in some parts of the country, among others.
The economy was able to maintain a positive growth trajectory driven by the recovery of oil price for most part of the year. This gave a major boost to the macroeconomic fundamentals. Nigeria remains a robust economy with a large market, abundant natural resources and a productive population. However, few weeks ago, we saw a sharp decline in oil price to $60 per barrel, from a peak of $86 in early October this year.
As a chamber, we have remained resolute in promoting polices that supports private sector development and the general progress of the economy. We were consistent in our policy advocacy and kept our promise of providing business development services to our members and the larger business community.
To the glory of God, we have maintained our leadership position as a leading voice in the Organized Private Sector in Nigeria.  This had led to notable rise of the chambers’ profile within the last one year.
It is my esteemed pleasure to present to you the Annual Report of the Chamber for the year 2018. This presentation will be in two parts: the business and economic environment and the activities of the chamber during the year.
Data from the National Bureau of Statistics (NBS) showed that the economy grew by 1.5% in the second quarter of 2018 from 1.95% in the first quarter. This underlines the fragile nature of the economy and the need to accelerate the economic diversification process.  With a population growth rate of about 3%, the implications of the current economic conditions for poverty and welfare are quite worrisome.
The Naira exchange rate was relatively stable for most part of the year and in all segments of the foreign exchange market. The high global oil prices and stable domestic production levels of crude oil were the two key critical factors that served to restore stability in the forex market. Overall, businesses witnessed improved liquidity and stability in foreign exchange market. Confidence has returned to the market and we hope that this would be sustained in 2019.
Interest rate regime remained difficult as rates were high across segments of the financial markets, with commercial banks lending rates at between 20-35%. The Monetary Policy Committee (MPC) of the Central Bank of Nigeria maintained a tight monetary condition throughout the year, with key policy parameters unchanged. Meanwhile, we applaud the introduction of the differentiated Cash Reserve Requirement (CRR) which was meant to ease credit to the real sector.
The CBN cited factors such as slow recovery in the economy, rising inflation rate, late implementation of 2018 budget, rising level of non-performing loans in the banking system, weakening demand & consumer spending and expected minimum wage increase as reasons for maintaining the monetary policy stance.
The Central Bank of Nigeria (CBN) consistently intervened in the foreign exchange market in 2018, and this pressured country’s gross external reserves from $47.5 billion it was in July 2018 to $41.99 billion at the end of October 2018.  The reserves faced increased pressure in the fourth quarter of 2018 which was a reflection of the capital flow reversals resulting from the rising rates in advanced economies.
The 2018 World Bank ease of Doing Business report ranked Nigeria 146 out of 190 countries. The report showed that the country took a step backwards from the 145th position in 2017. The ranking takes to account, trading regulations, property rights, contract enforcement, investment laws and availability of credit.
However, we note the efforts of the present administration through the Presidential Enabling Business Environment Council (PEBEC) and series of Presidential Executive Orders targeted at improving the business environment. We believe that Government still have enormous task of fostering an environment where entrepreneurs, small and medium enterprises can thrive better. Sound and result oriented business regulations are critical for private sector development.
In 2018, businesses experienced frequent incidence of regulatory challenges leading to increased burden on businesses, higher cost of operation, waste of executive time and reputational consequences.
These manifested in form of arbitrary fines & charges, sanctions and frequent summons of corporate executives by the National Assembly. The regulatory environment was a major source of distraction for many corporates during the outgoing year. It also adversely impacted the confidence of investors.
The Lagos ports were classified among the worst ports in the world in 2018 due to challenges bordering on delays of import/export processes, heavy human and vehicular congestion to and within the ports, difficulty in gaining access to the ports due to bad roads and security concerns.
Our recent maritime port feedback research finds that approximately 40% of businesses located around the Lagos ports’ communities have either relocated to other areas, scaled down operations or completely shut down. This development has very huge adverse implications for job creation, tax revenue .

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