BUSINESS OUTLOOK IN 2017

2016 was quite eventful globally. The World witnessed political and economic change that generated ripples that was felt all across the globe. Notably, Britain voted to leave the European Union and the USA voted Donald Trump who has vowed to trash the status quo.

Here in Nigeria, our economy was heavily battered by recession caused in part by the drastic fall in crude oil prices and tensions in the Niger Delta region. The apparent disconnect between the monetary and fiscal policies of the government can be also be named as a contributory factor.  With the advent of a New Year we now take a critical look at some important sectors of the economy and how they might fare in 2017.

MANUFACTURING

This sector suffered a lot in the past year with a lot of Companies closing down with the attendant job losses. A key factor that affected most manufacturing companies was the lack of foreign exchange needed to purchase critical raw material, which was exacerbated by the CBN policy excluding some items from access to foreign exchange.  One of such companies include local tomato manufacturer, Erisco Foods Limited which shut down its 450,000 tonnes tomato plant and sacked 1,500 workers out of its 2,520 entire workforce and moved its operations to China due to the refusal of CBN to allocate forex to the company for importation of raw materials.

It is expected that in 2017 the Government will step up its game by revamping its monetary policies to favor manufacturing industries so that they can play their expected role of employment generation, capital mobilization, wealth creation and technology acquisition. Economic experts have also advised the Government not to think of increasing tax but to rather widen the tax net in order to encourage industries to thrive in these challenging times.

TELECOMS

This impact of the economic recession was minimal on this sector when compared to other sectors and according to the Nigeria Communications Commission (NCC) it anticipates new investments to deepen broadband Infrastructure in the next few months e.g.  the Commission expects to add N799 billion (about $2.6 billion) through sales of telecoms licenses and capital investments in the year 2017.

The NCC also targets N189 billion earning from sale of spectrum licenses in the course of the year thus boosting the sector’s contribution to the Gross Domestic Product (GDP). This is in addition to expected revenue coming from switch to digital from analog broadcasting as well as the ongoing 4G LTE rollout. Available statistics show that these sectors would continue to perform well in 2017 as Nigerians continue to spend on airtime and data despite the deepening recession

OIL AND GAS

This sector is responsible for 80% of Nigeria revenues and suffered from restiveness in the Niger Delta as well as price fluctuation in 2016. The Government has however remained upbeat and aims to raise oil production to 2.2 million b/d or even more next year and in line with this it has entered into negotiations with Niger Delta Militants to ensure zero disruption.

Nigeria has also been exempted from the OPEC deal to cut output from January which should give it better leverage to maximize production if the Government can keep the militants in check. Another piece of good news is the new funding scheme for upstream ventures with foreign partners that was recently agreed.

REAL ESTATE

Despite the biting recession and perennial problems that undermine the sector there remains a strong need for shelter and thus opportunities still abound especially for affordable housing.  It is expected that a lot of rentals will continue to drop as landlords seek willing tenants. Commercial rents will also drop as people struggle with businesses that are suffering from the recession. It is however expected that commercial retail space development (shopping malls) will continue but on a reduced scale.

AGRICULTURE

Agribusiness remains the brightest light in this tale of despair and it is expected that the Government would ramp up policies that will aid investment in this sector. The Sector has witnessed a large influx of participants in the past year and it’s expected to continue because of the need for food for human consumption, raw materials for industrial growth and jobs for the growing population of our youths. The agriculture value chain has transcended just crop and livestock and now includes all business enterprises that buy from or sell to farmers e.g.  feed, seed, fertilizers equipment, energy, machinery credit, insurance marketing, consultancy, storage, processing, transportation, packing, distribution etc.

Government policies on Agriculture will be playing out this year especially in the area of grants and other forms of agricultural financing.  

MINING

The Nigerian Minister of Solid Minerals has predicted a rebound of the mining sector in 2017 and has promised to prioritize minerals for which we have  proven and commercially viable  reserves e.g. iron ore, coal, bitumen, limestone, lead/zinc, gold, and barite

The minister assures that, Nigeria will initially focus on the domestic market, trading ore and processed materials to domestic buyers at a quality level comparable to imported materials to win market share from imports.

OTHERS

Technology and, in particular, Fintech will continue to attract investment and similarly, infrastructure, particularly around power generation and distribution, will continue to attract investment.

CONCLUSIONS

Whilst we do not expect a radical improvement in economic performance in the short term, we are however optimistic that the economy may come out of recession with the right policies and enabling environment. It is advisable for the Government to place special focus on encouraging SME’s who are very germane in the quest to lift the economy out of this bring recession.

                        [fc id=’1′ type=’popup’ button_color=’#4488ee’ font_color=’white’]CONTACT US[/fc]