*800 firms close shop due to
harsh climate
BY UDEME CLEMENT
2012 witnessed remarked
changes in various sectors of
the economy, especially the
banking industry. While
government tried to map out
new strategies to reposition
the economy for greater
growth, experts are of the
opinion that government
needs a pragmatic approach
to actualise the
transformation of the
economy.Sunday Business
takes a look at the activities
in the various sectors during
the outgoing year.
The energy sector
The electricity generating
capacity stands at between
4,200 and 5,000 mega watts
(MW), even as government
stressed that with the effort
of the Nigeria Independent
Power Projects (NIPP),
commissioned in phases
across the country, power
generation will hit7,000 MW
by the first quarter of 2013.
Government emphasised that
with gas production in
excess of 500 standards
cubic feet, more modules
from the NIPP plants will be
able to provide electricity to
the national grid, such that
many communities can enjoy
uninterrupted power supply
of 16 hours per day and
more.
Economic experts are of the
opinion that Nigeria needs
electricity generation
capacity of about 35,000 MW
by the year 2020 for
domestic and industrial
consumption. A lecturer in
Economics Department,
Lagos State University (LASU),
who spoke with Sunday
Business under anonymity,
explained, " Nigeria has a
population of over
N160million people. So we
need about 35,000MW of
electricity generation to
achieve Vision 20:2020. For
instance, South Africa has
about 40,000MW electricity
generation with a population
of only 50 million and Brazil
has 100,000MW with a
population of just 192
million. It means we have a
long way to go in tackling
the power crisis. There must
be significant investment in
rural electrification
programmes to fast track
expansion of transmission
and distribution lines to rural
areas in the country."
Also, Sunday Business learnt
that government has
concluded plans to disburse
N170 billion to workers of
the Power Holding Company
of Nigeria (PHCN) to cover
their gratuities as well as
pension as agreed by
government and
representatives of labour
unions in the PHCN, for the
transfer of ownership of the
parastatal to successor
companies.
economy
The downstream sector/
Petroleum Industry Bill
The oil and gas sector of the
economy has been in the
news throughout 2012. For
instance, the year began
with a sudden increase in
the pump price of fuel from
N65 per litre to N150 and
subsequently N97 after a
nationwide strike and
protests by Nigeria Labour
Congress (NLC), which
compelled government to
reconsider its position. The
new fuel price regime paved
the way for a probe into the
activities of oil marketers in
the country, which yielded
subsidy scam, which is still
lingering.
Also, the Petroleum Industrial
Bill (PIB) designed to
streamline operations in the
sector to ensure a level
playing ground for
International Oil Companies
as well as local firms has
been in the National
Assembly since 2008 without
any positive outcome. The bill
has not been passed into law
notwithstanding the fact that
the petroleum minister, Mrs.
Diezani Allison-Madueke,
said that the revised version
of the bill was sent the
National Assembly for
consideration.
The banking industry
The banking sector
experienced some reforms
ranging from merger of
some banks to the removal
of N100 charge on the use of
Automated Teller Machines
(ATM). Some of the reforms
in the sector include,
cashless policy, which limits
the level of withdrawal by
individuals to N500.000 and
corporate body to N3million,
attempt by the Central Bank
of Nigeria to introduce
N5000 bank note, and
currency restructuring. For
instance, in first quarter of
2012, Access Bank Plc and
Intercontinental fused into
one entity, Ecobank acquired
Oceanic Bank,
Spring Bank became
Enterprise Bank Limited, First
City Monument Bank
acquired FinBank, Bank PHB
became Keystone Bank
Limited, Afribank became
Mainstreet Bank Limited,
Sterling Bank acquired
Equitorial Trust Bank while
Union Bank of Nigeria is now
owned by African Capital
Alliance Consortium.
Manufacturing sector
Economic experts say the
manufacturing sector
contributes only 5 per cent
to the Gross Domestic
Product (GDP). The Nigerian
Association of Chambers of
Commerce, Industry Mines
and Agriculture (NACCIMA)
recently said no fewer than
800 companies in Nigeria
closed shop between 2009
and 2011 mainly due to
harsh operating business
environment.
According to the president of
NACCIMA, Dr. Herbert Ajayi.
"More than half of the
surviving firms had been
classified as ailing, which
poses a serious threat to the
survival of the manufacturing
industry in the country.
Capacity utilisation in
industries hovered around
30 per cent and 45 per cent
on the average, with 100 per
cent overhead costs. Political
and economic factors
contribute greatly to the
decline in the manufacturing
sectors. For instance, poor
infrastructure and epileptic
power supply are also key
impediments to the industry.
The industry as a whole
operates on more than 70
per cent of energy it
generates, using generators
and operating these
generators greatly increases
the cost of manufacturing
goods in Nigeria . Other
factors include increase in
the prices of petroleum
products used by industries,
multiple taxation, unabated
smuggling and inadequate
access to finance, both local
and abroad".
Data obtained from the office
of the Director General, West
African Institute of Financial
and Economic Management,
stated, "In developed
countries where the real
sectors are thriving,
manufacturing contribute as
much as between 35 and 40
per cent to the GDP. For
instance, in Malaysia, the
manufacturing sector
contributess about 45 per
cent to the GDP. Our
manufacturing sector must
function optimally to
generate more jobs if we are
to realise the Vision 2020
target.
"At present, about 30million
youths are unemployed in
Nigeria . The economy is
growing at almost 8 per
cent, but we still have rising
level of poverty of about 70
per cent. The rate of
unemployment stands at
about 24 per cent, which is
about 35 percent among the
youths. Though increasing
unemployment rate is a
global phenomenon, we
must tackle it in Nigeria . The
inflation rate is 12.8 per cent.
So what we are experiencing
as economic growth rate is
only marginal increase. Every
year, government prepares
the entire budget depending
on income from crude oil. So,
the economy is still heavily
dependent on oil, while the
manufacturing sector, which
has the potentials to create
jobs and generate more
revenue, is not given the
required attention. The rate
of unemployment is growing
faster than the growth of the
economy. Increase in rural
unemployment is also
disturbing".
Aviation sector
The sector under the
supervision of Nigerian Civil
Aviation Authority (NCAA)
witnessed tremendous
improvements until the Dana
plane crash of June, which
claimed over 153 lives. Some
experts said the sector is
suffering from policies
inconsistency and lack of
proper plan to enhance rapid
development.
However, the sector may
soon experience greater
efficiency, as one of the
leading airlines in the world,
British Airways, has indicated
interest to assist Nigeria in
developing the industry. The
company will partner with
the Nigerian government to
reposition the sector .
Agriculture/ Small and
Medium Enterprises (SMEs)
The agric sector witnessed
some improvement during
the year. For instance, the
sector, according to the
National Bureau of Statistics
(NBS), contributed N2.9
billion to GDP in the second
quarter of 2012. The revenue
accounted for about 41
percent of the oil-rich
nation's total GDP for the
quarter. Aside from that,
under the Agricultural
Transformation Agenda
(ATA), government is
implementing a new fertilizer
programme whereby
government will withdraw
from fertilizer distribution to
the development of the
private sector to take on
these functions to enhance
development.
In the same vein, Small and
Medium Scale Enterprises,
according to experts,
contribute nearly half of the
GDP and accounts for over
25 percent of employment in
the country. Also, the recent
release from the Enterprise
Baseline Survey 2012 stated
that there are 17 million
Small and Medium Scale
Enterprises in Nigeria ,
employing 32.41 million
persons and making a
contribution of about 46.54
per cent to the GDP.
Also, the CBN has been in the
forefront of building a
synergy between the
financial and real sector of
the economy in order to
enhance accessibility to
capital for operators of SMEs
in the country. The initiative
is to ensure that the
operators of SMEs have
access to low cost funds to
boost their operations and
for start-ups to enhance
expansion of smaller units of
businesses across the
country. This will bring about
long-term benefit of
boosting domestic
production capacity for local
manufacturers, such that
they are able to carry out
operations with reduced
cost. In April 2009, the CBN
created N200 billion
Commercial Agriculture Credit
Scheme to stimulate growth
in the SMEs sub-sector, with
subsequent approval of
N500 billion intervention
fund in 2010 for the
manufacturing industry.
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