Group Chief Executive Officer of Integrated Financial Services Group, United Capital Plc., Mr. Peter Oladele Ashade, has said that the Nigeria business environment remains tough and challenging.
The consummate banker, who spoke to our correspondent in Lagos, recently, lamented that the continued focus on politics seems to be dissuading the implementation of meaningful structural reforms.
Ashade said that the Oil & Gas sector remains at the mercy of badly needed policy reforms that could boost investments into the sector, and that the delayed passage of the Petroleum Industry Bill is the ever-present risk creating uncertainty to the long-term investment in the sector.
“The PIB was broken down into four separate units governing regulation, administration, fiscal terms and a host of community bills. However, for the private sector to thrive, the government still needs to create the enabling environment,” he said.
The financial expert, who is also a fellow of the Chartered Institute of Bankers of Nigeria, Institute of Chartered Accountants and Institute of Capital Market Registrars, explained that the key challenges facing the banking sector currently included the weaker macroeconomic environment, high level of non-performing loans, and asset quality concerns.
Other militating factors, he noted, are pressure on capital adequacy ratios and elevated risk outlook, which continue to drag credit growth.
“Clearly, the performance of the banks reflect what is happening in the overall economy. While gradual recovery in the macro space is supporting performance so far, pre-election activities, which are expected to dominate the second half of 2018, is a concern for loan growth, hence resolving the challenges confronted by the banks is rooted in restoring the economy to the pre-2014 era of solid growth,” he warned.
Specifically, Ashade said; the concern on increasing investor’s confidence is broadly linked to political uncertainties, absence of reforms to drive market activities, and the dominance of foreign portfolio investors in the market has taken the centre stage.
“For instance, low capital market depth reflects the poor disposition towards the market and this is evident in the absence of operators in the key sectors of the Nigerian economy such as upstream oil and gas, retail trade and wholesale, power, telecommunications and agriculture in the market.
“On the other hand, weak local participation rate, high transaction cost and socio-political/economic concerns also constrain demands for Nigerian equities, lowering market capitalisation. To resolve this, we must stabilise the economy, drive reforms in critical sectors and boost investor education,” he said.
He emphasised that “overall, what the economy really need now are bold reforms (in the power, infrastructure, oil & gas, healthcare sectors, among others) to spur mid-to-high single digit growth and boost national
productivity.”
On the agriculture sector, he said while policy directives such as the commercial agriculture credit scheme, presidential fertilizer initiative, CBN’s agribusiness, small & medium enterprises investment scheme and the anchor borrowers Program, have aided the sectors’ growth in the space, there are issues yet to be addressed.
“For instance, storage, distribution and processing are hampered by poor transportation network, access to finance, poor local processing facilities and low investment in technology. In addition, the recent crisis between herders and famers is a major downside risk, which is already weakening the Agric sector GDP as at first quarter of 2018, while pushing food inflation northwards,” he lamented.
