|Budget 2012: Private Sector Flays FG for Delayed Assent, Monday, 16 Apr 2012|
(THISDAY) The Organised Private Sector (OPS) has bemoaned the delay by the Federal Government in implementing the 2012 Fiscal Budget, which was eventually signed by President Goodluck Jonathan last week.This formed part of the reaction from the Lagos Chamber of Commerce and Industry (LCCI) at its first quarterly media briefing on the economy held weekend in Lagos.President of the Chamber, Mr. Goodie Ibru, lamented that the delay of the budget, which was passed on March 15 and approbated by the President on April 13, had a number of far-reaching implications for the economy, expressing concern that budget delay had become a recurring phenomenon in the country.He noted that the public sector was a major driver of economic activities by virtue of the configuration of the economy and resource allocation. "Therefore, when the fiscal activity of government is slowed down, it has a dampening effect on the general cash flow in the economy," he said.
The hotelier and businessman added that capital projects would obviously suffer the risk of poor implementation, which would further take its toll on infrastructure development in the country. He expressed concern that the construction industry, which is driven principally by public sector expenditure, may be further depressed as a result of FG's delay in implementing the 2012 budget. He also observed that the payment of many contractors was dependent on the conclusion of the budget process. On the credit situation in the economy, LCCI noted that funding remained a major problem for many investors in the period under review. Ibru observed that the cost of fund in the economy was high and access to credit appeared to be an even more serious problem, with rising incidences of many small businesses now resorting to finance companies and money lenders where they pay between 60 to 120 per cent interest per annum, depending on their desperation. He further said that the situation could be largely ascribed to the tight monetary policy of the CBN and the harsh economic conditions which is affecting the quality of loans. "Let me stress that this economy cannot create the desired jobs if small businesses have no access to credit," he emphasised.
He observed that collateral cover requirements by banks, which are sometimes as high as 200 per cent, is capable of impeding access to credit, slowing down the tempo of economic activities and inhibiting intermediation in the financial system. Ibru also noted that government borrowing was also creating liquidity problems in the financial system and also crowding out the Private Sector in the credit market. According to him, "government is borrowing at a high cost of between 14 to16 per cent, which is one of the highest globally". This, he noted, has reduced the attraction to lend to entrepreneurs, by putting pressure on interest rates and increasing the outflow of funds from the banking system to the government coffers, a scenario which he sees as not healthy for the economy. He also noted that many private sector players, doing business with government agencies and institutions still find it a challenging exercise because of late payment for jobs done, non-payment for jobs done in some cases and disregard for contractual agreements. Ibru said that it is important to address these concerns if the desired synergy between the Public and Private Sector is to flourish.
He noted that one of the major reasons impeding the nation's progress was the absence of deterrent consequences for infractions, especially corruption cases. "Unless this changes, not much would happen in our quest for economic and social transformation. "We commend the National Assembly on its renewed commitment to ensure transparency in the conduct of government business. We note the startling revelations from the investigations of the Pension Fund and the administration of fuel subsidy. Our plea is that the matter should be followed to its logical conclusions," he added. The chamber also recommended the immediate transfer of the 'pay as you go' component of the pension scheme into the new system. The renowned businessman further urged the President to ensure that those whose conducts have been called to question should be promptly brought to justice, stressing that the law should promptly take its course. He noted that this was a unique opportunity for this government to demonstrate its commitment to the ideals of probity and integrity in the conduct of government business.
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