Business leaders plan expansion drive in 2016

Obodo Ejiro

Findings from a survey conducted by BusinessDay Research and Intelligence Unit (BRIU), the research arm of BusinessDay, indicates that a high number of business leaders plan to invest more in the coming year.

The survey which targeted 7oo local large and medium size business owners/entrepreneurs was designed to fine out their assessment of business performance in 2015; and gauge their business confidence for 2016.

Sixty-two percent of the business leaders rated the tempo of business in 2015 as fair, 25% rated business performance as poor, while 12% of them rated business performance as strong.

Those who rated business performance strong operate mainly in the food and beverages sector, pharmaceutical industry and manufacturing. The services sector accounted for the highest number of business leaders who described business performance in 2015 as poor.

Half of respondents are of the opinion that government policy had negative impact on their businesses in 2015, 37% of them expressed the neutrality of government policy on the way their business operated within the year while 13% said their businesses were positively affected by business policy within the year.

Reacting to questions bothering on their expansion plans for 2016, more than half of the business leaders expressed their plans to buy more machines and employ more individuals in 2016.

Seventy-seven percent of them said they would employ more personnel in 2016. On the other hand, 65% said they would expand their productive machinery.

Concerns about electricity supply were thrown up by respondents. Eighty-seven percent of them pointed to electricity generation as the biggest component of production cost. Sixty percent states that the regulatory environment/ Taxes remain a major cost factor, while 47% pointed to personnel cost.

Another important element to the business leaders is the high cost of acquiring production inputs and maintaining machines. This is especially exacerbated by the precarious exchange rate condition that has engulfed the country in the face of dwindling oil price.

They however expressed concerns on key issues including: “Poor access to finance (65%), slump in oil prices (58%), poor electricity supply (58%), unstable political environment (53%), unclear taxes (47%), poor regulatory framework (42%), worsening infrastructure (42%), and corruption in governance (29%).”

Asked if they believed the electric supply problems of the country could be over come in the near future, 43% of the business leaders were confident that things will change. But 37% of them said they have no comment on the matter while 19% of them said they do not have faith in the whole process.

Commenting on the outcome of the survey, Buchi Ejogwu, head of Research and Strategy, Equator Capital Limited said “government has to address the poor state of infrastructure and make pragmatic policies that will drive industrial development ranging from regulatory issues to bureaucratic bottleneck, double taxation and inadequate access to credit in 2016. The issues are many and increasingly hampering the ability of SME's to play their catalyst roles in development.”

On the CBN’s Monetary Policy rate cut which is deemed positive to businesses, he said “the problem associated with lending in Nigeria goes beyond reducing lending rates. From a borrower's perspective, low interest rate environment may be an incentive to borrow but it is not the same for the lender. The lender will among other things consider the borrower's capacity to pay. I do not see the banks increasing their loan book now given the size of bad loans and the effect on their capital adequacy and profitability.”

The federal governments 2016-2018 medium-terms expenditure frame work and fiscal strategy paper presented to the senate in early December indicates that government is particular about improving the business environment.

“The objective of the fiscal policy thrust for 2016 and beyond includes reflating the economy with an aggressive but purposeful increase in infrastructure investment, pension fund reforms, promotion of investment-friendly environment, appropriate protection of the domestic industry against unfair competition,” the policy document indicates.

Nigeria has been hit by a riskier macroeconomic environment which has seen the naira plummet in the parallel market, a rise in inflation rates and sustained drop in capital market indicators.

The Naira traded at $/N277 in the parallel market on 21/12/2015; inflation inched closer to double digit in November to end the month at 9.4%. On the other hand, the Nigerian Stock Exchange’s All Share Index and market capitalization depreciated by 732.35 points and N25.18 billion respectively from their previous weeks’ figures to close at 26,537.36 points and N9.12trillion.