NECA: Businesses grappling with traumatic times
The Nigeria Employers’ Consultative Association of Nigeria (NECA) says businesses are grappling with extremely traumatic times, urging the government to look beyond the seeming good performance of a handful big businesses in gauging the state of the economy. The President Mr Larry Ettah, in his address at the Association’s Annual General Meeting (AGM) in Lagos, said: “In recent times at our AGMs, we have variously described our operating environment as challenging, unpredictable, unstable and “energy sapping”.
“These words are, of course, true and descriptive of what our members have experienced in keeping their businesses afloat. As I reflect on the events and situation of our economy in the past one year, I am truly short of appropriate words to capture the extremes of hardship and trauma businesses have had to contend with to remain standing. Suffice it to say congratulations to any enterprise whose head is still standing above the inclement weather of our operating environment”.
Mr. Larry Ettah, who is also the Group Managing Director/CEO of UAC of Nigeria Plc (UAC), said the mortality rate of micro, small and medium scale (MSME) businesses is alarming, adding that if we are going to get a firm grip of the panacea to the high youth unemployment in Nigeria, then we must pay heed to the imperatives for sustainable enterprise.
On the economy last year and the outlook for in the year, the President said: “With a growth rate of 2.79 per cent in 2015; the year recorded a dramatic slowdown from the five to six per cent growth, the Nigerian economy has become accustomed to recording.
Ettah said the year had so far not been any better with multiple economic challenges: depleted foreign reserves from $ 29.9 billion in November, last year to $25.71billion on August 19, this year; naira depreciated by 31.7 per cent from N197/dollar in March 2015 to N330/dollar in August 2016; high capital outflow; upward trend of inflation from 8.5 per cent in March 2015 to 15.6 per cent in June 2016 and increased interest rates.
“While there is no doubt that the past administration was profligate in its management of our commonwealth, it is quite evident that the lack of clarity about the economic agenda of the current government and some wrong policy choices have contributed to the current economic stagnation and recession.
“We, therefore, welcome the thrust of 2016 budget of which recognises that meaningful GDP growth requires quality spending to reflate the economy. We need to invest in boosting our infrastructural stock; we need to reduce our domestic debt; and there is the need to spend to position our economy to be export oriented and less dependent on import. We hope this budget will be faithfully implemented as this is key to the revival of the economy from the current recession,” he said.
Ettah said no sustainable growth can take place in the economy without effective implementation of the budget, saying that it is a grave concern that year after year, the passage of the budget is subjected to a long period of delay.
On the deregulation of the foreign exchange market, he said in the heat of the challenge of scarcity of foreign exchange, NECA conducted a survey among its member-companies and discovered that only four to five per cent of members’ foreign exchange request for importation of raw materials and machinery were met by the banks.
“This actually explained business’inability to import required raw materials for production to replenish exhausted inventory (stock).
“ The implications of this, as it were, are: low productivity, low profitability, and staff rationalisation, which worsened the already unfortunate unemployment rate,” he said.
He, however, praised the Federal Government for heeding the call for a deregulated foreign exchange market,which allows market forces to determine the naira rate of exchange.
“Hopefully, this will improve supply of foreign exchange to the economy. It is hoped that in the medium term the policy will help improve and stabilise the value of the naira.
“The issue, however, still remains that of ensuring adequate availability of targeted development finance to the real sector, which has enormous potentials for job creation in the economy.”