How Buhari’s policies will affect economy in 2016
Tougher times for oil, gas sector
OPERATORS and stakeholders in the nation’s economic sector say expectations in 2016 are fraught with emerging challenges as the slow-paced change realised in 2015 may linger into the New Year but with a different texture.
According to them, while economic growth and expansion may be limited, the year will be characterised by clearer macroeconomic policy space, expansionary fiscal stance, huge debt profile, improved electricity and infrastructure, Petroleum Industry Bill (PIB) acceleration and downstream deregulation and blocking of leakages through the Treasury Single Account (TSA).
In the oil and gas sector, stakeholders expressed concern that the nation may face more tough times next year going by the falling crude oil prices, which may not rebound soon.
The Director-General, Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf noted that the macro-economic environment in 2016 would be characterised by clearer macroeconomic policy space as the targeted N300 billion by Nigerian banks to boost lending to Small and Medium Scale Enterprises (SMEs) and the agriculture sector in 2016 will boost small businesses’ development and employment generation as well as increase non-oil export.
“The insurance industry will remain largely under-penetrated with insurance density around 0.225 per cent. Therefore, significant change in this industry with respect to growth and penetration remains bleak even as the sector is still highly fragmented. The declining Gross Domestic Product (GDP) is also expected to strain, to a large extent, the performance of this industry.
“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,” he explained.
The Registrar and Chief Executive Officer of Institute of Cost Managers of Nigeria, Rev. Nosa Omoregie, has stressed the need for effective utilisation of the limited resources within the economy, especially with dwindling income from crude oil.
Omoregie, in a position paper from the institute made available to The Guardian, said the government should find a lasting solution to the rising cost of governance, “take the bull by the horn by doing a critical review and analysis of the activity of government administration, with a view to identifying value-adding and non-value adding activities.”
According to him, the government should “set up an ad-hoc committee to undertake a holistic review of the activities that make up the entire administration of government, with a view to ascertaining the value-adding, non-value- adding and wasteful components, not the setting up of an efficiency unit that would end up becoming another drain of resources and become comatose due to public service influence.”
He also called for the expansion of the scope of the already existing infrastructure, provided by the Bureau of Public Procurement, “with a view to transforming it into a National Public Expenditure Bureau or Commission, with focus on both capital and recurrent expenditures. The bureau should serve as the engine room for the nation’s cost or expenditure management.”
Essentially, he wants the administration to come up with a national cost management policy that would guide public expenditure in the country.
The Chairman and Managing Director, Frontier Oil, Dada Thomas, expressed concerns that the nation may face more tough times next year going by the falling crude oil prices, which may not rebound soon.
According to him, the nation has wasted the opportunities to utilise the proceeds from oil in the last seven years when crude prices were between $120 and $140 per barrel.
“Today we have oil around $37 per barrel, the future is going to be very tough for Nigeria because we will not see a $100 price for a long time to come. We saw $140, $120 for about seven years and we wasted all the money. There is nothing to show for it. Is that not a shame of a nation?” he said.
Thomas, however, urged the Federal Government to exhibit more seriousness in developing gas-to-power, noting that this singular effort would buoy electricity generation and supply to the entire nation, bolster the economy and create the much-needed employment for the teeming youths.
He said the government should also address the upstream gas challenges and encourage the private sectors to boost capacity, capture additional market and promote bankable projects such that the commercials banks could offer loan facilities to execute such projects.
“They have to ensure that they encourage the operators in this sector to develop the gas distribution grid. The private sector cannot do it alone because there are many things that government needs to put in place, so they need to make the business attractive for the private sector to invest in gas pipeline distribution network,” he said.
Thomas also called for intensive fight against corruption and ensure that transparency is entrenched in the oil and gas industry, while the Nigerian National Petroleum Corporation (NNPC) should be unbundled for greater efficiency.
Former President of the Chartered Institute of Bankers of Nigeria, Mazi Okechukwu Unegbu, said the government should tackle head-on the controversial foreign exchange scarcity and subsisting policy on domiciliary accounts lodgements and withdrawals.
According to him, it not only stifles investments inflows to the country, but also projects the country’s sovereign debt capacity in the negative, together with increased business uncertainty.
“The diversification of the economy must start immediately and no longer touted. We should notate much money again into the oil sector. Even in the electricity sector, it must be diversified because we have a huge deposit of coal in this country.’’
The Director-General of the Nigerian Insurers Association, Sunday Thomas, says the market is essentially looking forward to an early passage of the bill on the national budget so government can start the implementation of the programmes on electricity , infrastructure and security which are key elements to move the economy forward.
According to him, the association intends to sustain the good relationship between it and the regulators to move the insurance industry forward in the New Year. “That calls for the support of government for the industry especially in insuring its assets and paying premium.”
On his part, Director-General, Ikorodu Chamber of Commerce and Industry, Tope Oluwaleye, noted that the change promised by the Buhari government was still evolving, though many people had wished government would move faster.
“I believe that it is good to lay the necessary foundation to the change, lest we find ourselves back at square one. Economically things are yet to improve. The naira is still in a downward spiral and the cost of oil, globally, is southbound. These have impacted seriously on Nigeria where some state governments even found it difficult to pay salaries. Now there are hints of workers’ layoff and all that. So 2015 was generally a bag of mixed blessings: economic downspin and hope as espoused by the advent of a new government.
“Normally one would expect 2016 to be markedly better in all these areas. The budget appropriation for 2016 has been variously described as capable of lifting the country out of the woods. One hopes and prays this would be so, but the continued slide in the price of oil which is the premise of the budget gives cause for concern. As a nation we need to find an alternative source of funding fast. In this regard one hopes that the solid minerals sector would be adequately explored.
“In 2016, one expects that a right economic direction would be espoused by government so that industries can thrive. For most businesses the challenge is not so much access to funds as the right enabling environment to function. Therefore one would expect the emplacement of infrastructure like regular provision of electricity, good road network and so on. Thank God the present administration is tackling the issue of corruption so we expect the mitigation of this vice in the country’s business space in the new year.
“The Ikorodu Chamber of Commerce and Industry hopes that our members will thrive in their businesses in 2016 as Government addresses these issues which had hitherto been a constraint to the development of commerce and industry in Nigeria,” he added.
The Lead Director of Centre for Social Justice, Eze Onyekpere, said the government should effectively come out clear and implement its decisions on fuel subsidy in 2016, especially those that would reflect competitive and market-driven components.
The National Assembly, he said, should thoroughly review the budget and ensure that any frivolous or inappropriate expenditure is weeded out, as well as set a framework for the identification of beneficiaries of the conditional cash transfer scheme to avoid fraud in the system.
“The wide gulf between the official exchange rate and what is available on the streets needs to be bridged. It should reconsider its policy that bars Nigerians from depositing their foreign currency in the banks,” he said.