By Emma Emeozor
At a time when foreign companies are reportedly relocating from Nigeria to neighbouring countries due to the biting effects of recession, it would be hard to imagine that a coalition of foreign embassies would carry out periodical survey to assess the economic status of the country and determine how, where and when to intervene in the interest of both the host country and their business interests.
The survey is carried out independent of the ministries, departments and agencies (MDAs) of the Federal Government. Private organisations are commissioned to carry out primary and secondary research involving their companies and workers.
The 2017 Nigeria Business Outlook was sponsored by the embassies of Austria, Germany and Switzerland (AGS). The report by Roedl & Partner was the second, the first being the 2016 survey by Bain & Company
The report has challenged the Federal Government to do more in its bid to reposition the economy, just as it challenged indigenous companies to take research and development seriously.
Motivation behind the survey
The consul-general of Germany, Ingo Herbert, consul-general of Switzerland, Yves Nicolet, and Austrian commercial counsellor, Ms Nella Hengstler, expressed satisfaction with the findings. For them, it did not only boost the efforts of their respective missions to encourage their investors and companies to come to Nigeria, it also reassured Nigerians that there is hope of the economy bouncing back.
The German Delegation of Commerce and Industry (GDCI) aptly explained the reasons behind the survey when in a statement it said: “This business outlook event is an annual exercise that will provide an insight to interested stakeholders and political decision-makers doing business in the country.
“In addition, it will also be a means of dialogue with the Federal Government to bring to their attention difficulties being experienced by the international private sector operating in Nigeria. AGS enterprises are committed to continue partnering with Nigeria to improve the overall business environment exemplified by the ease of doing business ranking.”
The Nigerian economy
Presenting the report, associate director (advisory services), Roedl & Partner, Olanrewaju Yusuf, reminded guests of the current status of the economy, which “has been on a downward spiral” and is “currently in a recession.”
In his efforts to explain the background of the survey, he visited 2016 statistics and made a projection of what is expected of the economy in 2018.
His submission was that, in 2016, gross domestic product was at 2.7 per cent, driven by a significant decline in the country’s oil output, shortages of power, fuel and foreign exchange.
“Inflation doubled to 18.8 per cent at the end of 2016, from its level of 9.6 per cent in 2015 mainly as a result of fuel, electricity price increase and the depreciation of the naira during the year,” he said.
Yusuf added that, “Nigeria’s economy is expected to grow by about 1 per cent in 2017 and 2.5 per cent in 2018, based on an expected increase in oil output, as well as the accelerated implementation of public and social investment projects by the Federal Government.”
Unique component of the research methodology
The officials of foreign companies and businessmen operating in the country are part of the economy and, as major operators, their input, based on experience, cannot be ignored. This explains the importance of seeking their opinion on the economy. In other words, it is not enough for policy planners to sit in their offices and compute statistics based on theoretical analysis, which has often led to wrong judgment.
Roedl & Partner did not confine its research to looking at the books, and verifiable assets to back up the figures. It also sought the reactions of expatriate workers. The report showed that 27 Germans (an increase of 3 per cent from 2016), three Austrians (an increase by 7 per cent against 2016) and 12 Swiss (decrease by eight per cent against 2016), responded to the research questionnaire. The 2017 respondent chart has been adjudged as “better” compared to that of 2016.
At the company level, the report said: “Manufacturing industry respondents reduced by 34 per cent, oil and gas respondents decreased by 57 per cent, pharma and health care accounted for 21.95 per cent respondents and other services accounted for 24.39 per cent.
Ease of doing business in Nigeria
Quoting a World Bank report, Roedl & Partner said, “in 2015, Nigeria ranked 170 out of 189 while in 2016, the country ranked 169 out of 190 countries covered by the survey.”
Survey results (exports and imports)
Drawing from the World Bank Integration Solution report, Roedl & Partner said exports from Nigeria to Austria, Germany and Switzerland (combined) “rose sharply by 72.2 per cent year-on-year to N985,816.9 million in December 2016.” It also noted that “Nigeria ranks 148th out of 189 countries for ease of doing business (according to World Bank’s Ease of Doing Business.)”
On the other hand, imports from the three countries “reduced from N758,772.70 million to N714,554.80 million in December 2016.” However, the share of export sales, compared to turnover, showed that “export sales increased by 36 per cent on the average.”
Number of employees
The report observed that “there is an approximately 1.6 per cent average decrease in the number of employees year-over-year.
Economic prospect and climate
Since the concern of many Nigerians, particularly the vulnerable class, is how to put food on their table and meet their other daily needs, they have persevered since the recession hit the country, believing that there would be a positive turnaround. But each day, this thinking seems to become forlorn hope, even as government continues to renew its pledge to revamp the economy.
However, in the face of this weary atmosphere, AGS has remained strong in the conviction that Nigeria is a destination for successful business. They seem to see more light at the end of the tunnel as evidenced in the findings.
The aspect of the report on economic prospects indicates that “better economic prospects increased by 16 per cent between 2016 and 2017.” This even as AGS quickly pointed out that “about equal fell marginally (with 1 per cent)” in 2017 “relative to last year.”
It is encouraging to note that “none of the respondents project that the economy will be worse off” compared to 2016. Rather, “in general, the respondents are more optimistic than they were last year.”
On economic climate, the report said “28.21 per cent of the respondents felt the current climate was satisfactory, not excellent and not good.” Even then, “there was 7.72 per cent drop in response for ‘bad’, an indication of an increasing optimism as the economy gradually starts to recover.”
Business expectation
One of the responsibilities of the embassies is to guide companies from their countries in a manner that will enable them thrive in their ventures. The success of the companies must be seen or determined by the percentage of profit (turnover) they make yearly. Therefore, business expectation was given priority in the report under the following sections: strong growth, moderate growth, stagnation, negative growth and worse.
A summary of the sections showed that “relative to 2016, 10 per cent less expect strong growth while 10 per cent more expect a moderate growth.”
However4, “while 2.33 per cent of the respondents predicted negative growth in 2016, 12.82 per cent expect to see negative growth in 2017.”
Workforce development
The following factors were considered in workforce development and headcount: increasing workforce, stagnating workforce and decreasing workforce. With all the factors put together, the report said: “in 2016, 18.6 per cent of respondents increased headcount. However, 48 per cent expected to increase headcount in 2017.” It further observed that “in 2016, 48 per cent headcount remained the same whereas 26 per cent less expected headcount to remain the same in 2017” just as “15 per cent of respondents expected headcount reduction in 2017 as against 32 per cent in 2016.”
Impact of forex, corruption, others on business in Nigeria
The embassies are conscious of the fact that their companies may not do well and make profit, if the enabling business environment is lacking. Of course, the importance of an enabling environment cannot be overemphasised. For example, businesses have been crippled in states affected by Boko Haram terrorists’ activities. It not too long since oil companies restarted work in the Niger Delta region, following a spell of militant attacks on facilities and kidnapping for ransom.
The survey considered the likely impact of the following factors on the smooth operation of their companies: oil price, the value of the naira, electricity supply, import restrictions, anti-corruption, terrorism, security, transport and forex supply.
Precisely, the survey sought from respondents which of the factors were likely to impact more negatively on their business. The findings said 266.67 per cent of respondents indicated foreign exchange regime, 23.68, corruption, 23.0, oil price, “as the strongest factors affecting their businesses, respondents indicated foreign exchange regime.”
According to Roedl & Partner, “the trend remained largely the same as in 2016, where 69.77 per cent respondents indicated that foreign exchange regime, corruption (35.71 per cent) and power (26.19 per cent), respectively, had the strongest influence on their businesses.
Power supply challenges
The problem of power supply in Nigeria continues to remain a nagging migraine, with Nigerians disillusioned over government’s efforts to resuscitate the sector. How did operators of foreign companies in the country respond to the issue of power supply? It is food for though for the Federal Government.
The findings said: “In 2016, 41.86 per cent of respondents expressed willingness to install alternative power supply” while “13.95 per cent were not willing” and “44.19 per cent not sure.”
Interestingly, “in 2017, 29 per cent more respondents” were willing to install alternative power supply while 94 per cent more were not willing” just as 57 percent less were not sure.”
Roedl & Partner’s interpretation of the response was precise. It said respondents “indicate lack of confidence in the ability of the national grid to meet their power need.”
That being the case, the question that immediately comes to mind is what the sources of power supply are for Austrian, German and Swiss businesses in Nigeria. The findings show that “in 2017, dependence on diesel generator increased by 2 per cent, dependence on gas increased by 16 per cent while dependence on national grid decreased by 7 per cent. This further buttresses the lack of confidence in the national grid,” Roedl & Partner said.