LCCI Survey on Investors’ Confidence in Nigeria Disagrees with Global Perspectives

A survey carried out by the Lagos Chambers of Commerce and Industry (LCCI) is at variance with the submission of international investors who last week said, all the bombs from Abuja to Nairobi has so far has failed to slow growth in markets.
But the LCCI survey known as Nigerian Business Confidence Index (BCI) said confidence dropped 5.1 percent to 14.3 percent from 19.4 percent in the second quarter as top business executives continued to worry over the security situation, government policy changes and poor power supply among other challenges.
After a series of bombings hit Nigeria’s capital this year, several investors set to join Ridle Markus on a trip to Abuja postponed because of security concerns.
While not all of them made the journey with the Johannesburg-based Barclays Africa Group strategist in June, Markus said some of their money found its way into the bond market of the continent’s largest economy. Confidence in World Bank predictions that sub-Saharan Africa will post the world’s fastest growth outside of Asia for the next three years helped Nigerian naira debt return 13 percent in 2014, the best of 16 emerging markets tracked by Bloomberg after Turkey.
“Despite the violence in Nigeria, the opportunity can’t be ignored,” Markus said by phone from Johannesburg on July 29. “That is the ultimate view of many of our investors.”
Investors are looking past intensified attacks by Islamic militant groups Boko Haram in Nigeria and al-Shabaab in Kenya as unprecedented stimulus from central banks including the Bank of Japan, the Federal Reserve and the European Central Bank spurs demand for riskier debt to boost returns. 
But the Third Quarter 2014 BCI Survey released by the Lagos Chamber of Commerce, and Industry, LCCI, at the weekend, reasoned that “The drop of the BCI scores at this time suggests that business leaders are largely pessimistic about expanding their investment over the next few months.”
Analysts say, the respected LCCI appears to have joined the likes of the APC politician who never sees anything good about Nigeria.
The LCCI index however showed retained confidence in the manufacturing sector with a positive confidence rating of four percent, the same level, which it recorded in the second quarter as against the minus 10 percent confidence rating recorded in the first quarter.
“Interestingly, the manufacturing sector posted a positive confidence level of four per cent for the second time over the last seven quarters.
“This sector has consistently remained at the bottom of BCI league table by steadily recording negative confidence levels. Medium and small manufacturing enterprises are the most hit by the lingering challenges constraining productive activities in the country.
“The most disturbing factors for manufacturers include: power supply challenges, logistics challenges, the influx of imported and substandard products, preference for imported goods by Nigerians, poor access to credit, high cost of doing business, infrastructure shortcoming and inhibitive activities of government regulatory/monitoring agencies,” the LCCI said.
Agricultural sector topped the decline index with 16 percent down eight per cent from 24 percent in the second quarter, with the LCCI stating that the decline in the agricultural sector confidence levels are due to poor access to credit, infrastructure shortcomings, weak agricultural-industry linkages, transport and logistics constraints and concerns over the inclusiveness of Federal Government’s ongoing agricultural transformation initiative.
According to the chamber, which represents the largest collection of Nigerian business, “The optimism among players in the agricultural sector, which was relatively strong in 1st and second quarter is beginning to moderate.
“This is a pointer that operators expectation in the agricultural sector is beginning to wane. The BCI the third quarter-2014 survey confirmed an increasing level of uncertainty among the private sector players due to rising electioneering activities and the build up to the 2015 general elections.”
Other sectors on the decline in the confidence index list in the third quarter of 2014 include Building & Construction, which declined by seven per cent with its eight per cent index record in the third quarter below 15 percent in the second quarter.
Oil and Gas recorded five per cent decline (from 14 percent in second quarter to nine per cent in the third quarter and four per cent in the first quarter); Professional Services declined by two per cent with 13 percent in the third quarter after recording 15 percent in the second quarter as against 10 percent in the first quarter, while the sector termed ‘Others’ in the index list recorded four cent decline in the third quarter.
However, some other sectors have in the last three months, witnessed significant increase in the confidence levels. On that list, financial sector (banks, e-payment operators, finance houses and BDCs) continues to top the league table of business optimism with 32 percent BCI score in the third quarter of 2014.
Impressive corporate reported for the period ended June 30 2014 and the recovery of the nationalised banks, according to the statement by LCCI, contributed significantly to the sustenance of optimism among the financial sector operators.
“Notwithstanding, how much the ongoing regulatory induced recapitalisation of the Bureau De Change, BDC, and finance companies will impact the finance sector will be seen over the subsequent quarters,” it stated.
It also stated that business leaders in the financial services sector mentioned macroeconomic fluctuations, policy uncertainty and issues concerning implementation of the new CBN Governor agenda as key sources of concern to them.
Other sectors that have recorded increased business confidence in the third quarter of 2014 include Telecoms / Postal with five per cent confidence level higher than the previous quarter, Distributive Trade recorded eight per cent increase (from 12 percent in the second quarter to 20 percent in the Third quarter after declined from 17 percent in first quarter), while Hotel & Restaurant recorded three per cent increase in its BCI.
LCCI has attributed the key factor factors mostly depressing the confidence level of business leaders at this time to security challenges across the country, political activities, port gridlock, government policy, as well as epileptic power supply.
It stated that “Nigeria’s BCI scores over the years continue to trail below the 50 percent global business confidence threshold. Investors and business leaders remain wary about the state of the economy and the challenging business environment.
“The key factors that mostly depressed the confidence level of business leaders at this time are; security challenges across the country, political transition/electioneering activities and associated risks; cargo clearing issues and access to and from the nation’s foremost ports – Apapa and Tin Can; policy uncertainties and regulatory concerns and worsening public power supply.”

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