LCCI Predicts Declining Investors’ Confidence
The report identified Nigeria’s Egina deepwater project, Kaombo and Moho Nord marine developments as some of the noteworthy projects to be developed by the company over the next five years.
In Latin America, Infields said the subsea market would continue to be predominantly driven by developments in Brazil, while the US Gulf of Mexico is likely to continue to drive subsea activity in North America, accounting for 97 per cent of the region’s subsea capex demand and 87 per cent of subsea tree installations. According to the report, Chevron, Shell, ExxonMobil, and BP could still hold the largest share of capex demand.
The report further highlighted that while the subsea market has the potential for growth during the next five years, low global oil prices will affect subsea developments. The Executive Secretary of Major Oil Marketers Association of Nigeria (MOMAN), Mr. Obafemi Olawore had stated that as the value of the naira was also declining, the cost of petrol was rising, despite the slump in crude price.
“For petrol, the exchange rate for bringing products before the devaluation was N171.36 per dollar. At that rate, the landing cost of petrol was N90.67 per litre. There was a time the exchange rate rose to N188, that is, N188 was the interbank rate, while the Central Bank of Nigeria (CBN) gave us N171.36. But when it went to N188, the landing cost of petrol rose from N90.67 to N98.36. As at today when the exchange rate has gone to N199 (there is no window again), the landing cost rose to N103.45. So, you see that the main factor here is the exchange rate. If it moves to N215 per dollar, the landing cost will move to N110.84,” he explained. The Lagos Chamber of Commerce and Industry (LCCI) has predicted that business leaders will be averse to investing in the nation’s economy, noting that the drop of the Business Confidence Index (BCI) from 30 per cent it posted in the fourth quarter in 2014 to 22.3 per cent, suggests that business leaders are largely pessimistic about expanding their business and investment spending over the next few months.
In its Q1 2015 aggregate report made available to THISDAY, the LCCI said the drop in BCI represents a 7.7 per cent point slack of the confidence level among business operators over the last three months noting that this is the largest quarter on quarter point drop of the BCI score over the last three years.
It stated that conventionally, movement of the BCI score by up to five points indicates the presence of significant positive or adverse development in the country’s economic/business environment.
According to LCCI, factors that mostly lowered the confidence level of business leaders at this time includes, heightened uncertainty surrounding the 2015 general elections, depressed crude oil price in the international market and the volatile exchange rate leading to significant depreciation of the local currency.
It said over the last few months, business managers and investors have faced heightened anxiety and commercial risks associated to the political uncertainty in the country, maintaining that unpredictable political developments has engendered uncertainty among economic agents, increased the risk profile of new contracts and distorted investment plans.
LCCI added that initial commercial plans and investment decisions across the economy have become very fragile leading to less than optimal operations and delay tactics by companies pending when things will start to normalise.
“Over the years, Nigeria’s BCI scores continues to trail below the 50 per cent global business confidence threshold due to the lingering infrastructural and institutional shortcomings. The first quarter in 2015 BCI survey presented far reaching and very worrisome picture about the state of the economy triggered by profound political uncertainty and oil price fluctuations,” LCCI said
The Chamber pointed out that the oil and gas industry are the worst hit by the uncertainty surrounding delayed passage of the Petroleum Industrial Bill (PIB) coupled with the adverse developments in the global oil and gas market, noting that the approval delay of the 2015 draft budget, influx and rising patronage of offshore consultants, advisers and political risks in the country were mostly the concern of players in the professional business services sector.
On the nation’s Information and Technology/Telecommunications sector, the chamber said uncertainty relating to approval and contents of the 2015 budget, security challenges, regulatory issues and 2015 elections top the concerns of players in the sector .
It added that patronage for businesses has been on the decline due to weak consumer demand, depreciation of the Naira, e-trade platforms and rising cost of goods and services.
Furthermore it said business leaders in the financial services sector have revealed that macroeconomic fluctuations, flight to safety due to the general elections, downgrade of sovereign ratings by international rating agencies, policy uncertainty and exchange rate volatility has continued to plague the financial sector of the economy.