Difficult access to forex to persist
•Likely exchange rate adjustment in Q1
By Franklin Alli & Naomi Uzor
INDUSTRIALISTS in the country have taken a look back at the out gone 2015 and expressed hope that 2016 will usher in a better business environment for them if the right policies are put in place by the federal government to stimulate the economy and attract domestic and foreign investments.
LCCI President, Chief (Mrs) Nike Akande
They made their expectations for the new year known through their various trade associations like the Lagos Chamber of Commerce and Industry, LCCI; Nigerian-British Chamber of Commerce (NBCC), Ikorodu Chamber of Commerce and Industry (ICCI), etc.
Muda Yusuf, Director General, LCCI , noted that this year, the chamber expects the businesses of their members to surge and the country’s GDP growth to rebound, though, slowly to about 3.5 if the right mix of fiscal and monetary policies are put in place.
According to him, while the recovery is expected to be driven by increase in government expenditure, the growth in oil sector may be constrained still by low price and investment drive.
“Also the exchange rate volatility is expected to persist fuelling high inflation of about 10-11 percent. However, correction towards Real Effective Exchange Rate (REER) in the form of exchange rate adjustment is likely in Q1, 2016. This will reduce the pressure on external reserves.
Sectoral Outlook 2016
*The targeted N300 billion by the Nigerian banks to boost lending to Small and Medium Scale Enterprises (SMEs) and the agriculture sector in 2016 will boost SMEs development and employment and thus increase non-oil export.
*Subsidy arrears payment and end of subsidy regime likely to result in improved market efficiency and profitability as downstream sector players explore pricing dynamics to boost investment. The expected deregulation in the downstream sub-sector will be a game changer.
*With the declining trend of global oil price and its attendant impact on government revenue and foreign reserves, general business outlook will remain tense. Implications on cost of and access to credit will be undesirable. Businesses, especially those with high forex exposure, will continue to face challenges of meeting foreign obligations to suppliers and partners. This will also impact contractual trust and integrity.
*Risk of default in financial obligations in both public and private sectors will be high as macro-economic conditions and cash flow remains tight. Also, in a review of 2015 carried out by the NBCC, the Chamber’s President, Prince Dapo Adelegan, stated that the Federal Government has much to do to move the economy forward in the New Year.