Waning operating climate challenges FDI…Report

The seeming unfriendly business environment crated by revocation of resident permits, by the oil and Gas free Zones Authority (OGFZ), of few companies, which has led to withdrawal of at least 16 companies in from the Onne free trade Zone, reflects harsh operating environment.

A report by the SBM intelligence released at the weekend, noted that even as the federal government has assured that the revocation was not political intended, the general investing community may have interpreted it otherwise as it will further give wrong impression on ease of doing business in the country.

“The Nigeria Immigration Service(NIS) and the OGFZA, had revoked permits of staff of six companies, including Intels Nigeria (co-founded by former Vice-President Atiku Abubakar), Prodeco International, West Africa Machinery Services, Net Global System International, MGM Logistics Solutions and Oriean Investment Ltd,” SBM said.

It added that, just as the Federal Government had said that the move was not politically motivated, but the public are inclined to believe the opposite.
“The FG says the revocation of residence permits of expatriate workers in Integrated Logistic Facilities & Services (Intels) was not politically motivated. OGFZA managing director, Umana Umana said the affected companies failed in their requirements to renew the 2017 operational license, as stipulated by OGFZA laws.

According to the report, whenever government needs to explicitly state that a move is not politically motivated, the discerning public is generally inclined to believe the opposite. All the actions of the government around the Intels saga do not point to economic motivations. Attempting to widen the companies impacted by this latest move does little to mask the primary target.

The government, the report said, “will do well to be reminded that Nigeria is unable to meet the funding requirements for most of the crucial developmental needs of the country. It will rely on partnering with the private sector to achieve even the baseline goals. And signals such as this will be interpreted in only one way.”

Meanwhile, the report also hinted that non-recovery of the manufacturing sector as major contributor to Nigeria’s exit form economic recession, as a minus for government’s effort at boosting the nation’s economy.

The SBM intelligence which analyzed economic and political developments during the week and focus for the week ahead, pointed that the nation’s economic recovery ‘desperately needs momentum”
The report pointed that growth third quarter which saw the economy grew by 1.4 per cent is driven by recoveries in oil price and oil production levels; and not by growth in manufacturing.

It noted that in the course of the Q3 growth, non-oil GDP contracted, especially a key sector like manufacturing. “This indicates that none of the structural changes that countries like Russia and Egypt managed during the oil price crisis of the last two years was carried out by Nigeria.”

The report recalls that Nigeria’s economy grew 1.4 per cent year-on-year in the third quarter, the statistics office said on Monday, extending its slow climb out of its first recession in a generation. It added that Africa’s largest economy returned to growth in the second quarter of 2017 but the recovery has been fragile due to depressed oil revenues and a shortage of hard currency.

The NBS in the report said oil production stood at 2.03 million barrels per day in the third quarter. Agriculture grew by 3.06 per cent in Q3 compared with 3.01 per cent recorded in Q2; Q2 GDP growth was revised to 0.72 per cent from 0.55 following oil output revisions by the Nigerian National Petroleum Corporation; Q/q real GDP growth was 8.97 per cent, but Telecommunications & information services contracted further by 5.68 per cent in Q3 2017 after shrinking 1.92 per cent in Q2.

The report added: “We remain supremely vulnerable to shocks to either global oil prices or any distortion in production levels, two events that the Nigerian state has scarce control over. The submission therefore is “we have let the fine opportunity presented by the crisis go to waste.”