The Lagos Chamber of Commerce and Industry (LCCI) has warned the federal government that the proposed banning of mining activities in all part of Nigeria would send a wrong signal to foreign and local investors.
The LCCI stated this in a statement it issued at the weekend titled: “LCCI Statement on the Proposed Nationwide Ban on Motorcycles and Mining Activities,” signed by its Director General, Dr. Chinyere Almona, noted that the move to ban mining activities would also deal a big blow on the federal government’s avowed commitment to diversify its sources of revenue away from oil and gas sector.
The federal government had considered after a recent National Security Council (NSC) meeting to impose a nationwide ban on motorcycles and mining activities in the country as part of its strategy to curb terrorist activities and disconnect them from their sources of funding.
But the chamber described the move as an attempt to blame and punish all legitimate mining operators for the activities of bandits and terrorists operating in Nigeria and therefore urged the government to be wary about the unintended consequences this ban would have on the country’s mining sector and the business environment.
The LCCI stated: “This announcement has further validated to foreign and local investors that it is unsafe for them to invest in Nigeria’s mining sector. Furthermore, the existing local investors who have secured loans to finance their mining projects across Nigeria are at the risk of losing their investments of several years.
“The proposal has further damaged the diversification plans of the federal government to pursue a non-oil exports-based economy. According to the Central Bank of Nigeria’s economic reports between 2015 to 2020 the total value of solid minerals exports within that period was $1.75 billion.”
The chamber also warned the federal government that the country, “cannot afford to jeopardise the fortunes of mining in Nigeria with a blanket ban on mining activities when we should be able to isolate illegal miners and demobilise criminals from mining sites.
“We urge the government to reconsider ways to demobilise criminal activities from mining sites and create a safe environment where mining can thrive.”
It argued that duly licenced mining companies should be clearly differentiated and distanced from the activities of bandits and terrorists whom the National Security Council (NSC) based their proposal upon.
The chamber also emphasised the need to enforce all the necessary laws and policies that would guarantee security of local and foreign investments in the solid minerals sector and ensure that investors would get best returns on their investments.
The LCCI, therefore, “urges the government to empower the solid minerals and mining sector through the deployment of Geographic Information System (GIS), automation of application and processing of mining licenses, leases and permits all through a one-stop-shop platform. The Integrated Automation and Interactive Solid Minerals Portal (IAISMP) should truly be a go-to portal for real time information on the sector.
“We should also finalise the plan to build a national electronic geo-data archiving management system to be called the Nigerian Geo-Data Center at the Nigerian Geological Survey Agency (NGSA). All of these would make it easy to access information on mining by investors across the globe.”
OPS to CBN: Increasing MPR to Fight Inflation is Counterproductive
Meanwhile, operators of the organised private sector (OPS) have said the Central Bank of Nigeria’s latest increase of the Monetary Policy Rate (MPR) would not be effective to curb inflation but would pernalise industrialist and other private enterprises.
The members of the OPS that shared their views were the Manufacturers Association of Nigeria, the National Association of Chambers of Commerce, Industry and Agriculture (NACCIMA), the LCCI and the Centre for the Promotion of Private Enterprises (CPPE).
The members of the OPS noted that the outcome of the Monetary Policy Committee (MPC) meeting of July 19, 2022, that increased the MPR from 13 per cent to 14 per cent was unexpected, but not desirable even though the decision was in line with the policy tightening trend by most central banks around the world.
According to them, the decision failed to reckon with Nigerian domestic peculiarities since the key drivers of inflation in the country are largely supply side variables that are not driven by demand.
The Director General of MAN, Mr. Segun Ajayi-Kadir, said during the weekend that the implications of the upward trend in the MPR for the manufacturing sector would include rising cost of production with trickle down effects on capacity utilisation, inventory of sold goods and profitability of manufacturing firms.
Ajayi-Kadir said: “Higher MPR and lending interest rate, which will further constrained access to credit and increase the cost of borrowing for manufacturers, especially those in the small and medium industry cadre and upward (sic) swing in the value of shares for manufacturing concerns listed on the stock exchange.
“It will also have differing implications like reduction in demand for manufactured products leading to poor sales and turnover; lower competitiveness as the high inflation rate further mounts pressures on the already very high-cost operating environment, which may hinder the prospect of beneficial trade in the region and the continent.”
Speaking in the same vein, the LCCI said that the increase in the MPR would tame capital flight, but would not be effective in moderating domestic inflation
It said: “We, however, reiterate our earlier position that rate hikes or monetary policy instruments alone will not yield the desired result of lowering inflation rate without a corresponding boost to the supply-side factors like foreign exchange scarcity, insecurity, rising costs of fuels, and weak infrastructural support for production.
“The CBN rate hike is seen to be a necessary option considering that most other economies are raising rates for the same reason of taming inflation. Comparatively low interest rates can make our portfolio assets less attractive to asset buyers and offshore investors. Consequently, the economy could suffer from massive capital flight with a negative effect on the Naira exchange rate.
“We urge the CBN to maintain its targeted intervention schemes for agriculture, manufacturing/industries, energy, infrastructure, healthcare, exports, and MSMEs (micro, small, medium and small-scale enterprises) and other real sectors of the economy. Moreover, development finance loans should be targeted at MSMEs,” adding that while “it is expedient to curb inflation rates, we equally risk a contracted economy that may go towards a recession.”
Similarly, the President of NACCIMA, Mr. John C. Udeagbala, said: “While we welcome the decision of the Monetary Policy Committee of the Central Bank of Nigeria to raise the Monetary Policy Rate, we want to state that this is majorly an inflation management measure and does not address the root cause of the inflation itself, which is rising food prices brought about by a number of factors including the devaluation of the Naira and the cost of energy which has affected production and transportation.
“Nevertheless, we look forward to the continued implementation of the Central Bank’s intervention in the agriculture, manufacturing, energy, healthcare and export sectors, which will ensure some improvement in food and energy supply.”
According to the Founder of the CPPE, Dr. Muda Yusuf, “the MPR hike means that the cost of credit to the few beneficiaries of the bank credits will increase which will impact their operating costs, prices of their products and profit margins. The equities market may be adversely impacted by the hike.”
Yusuf observed that the Nigerian economy is not a credit driven economy, unlike what obtains in many advanced economies which have much higher levels of financial inclusion, robust consumer credit framework and strong correlation between interest rate and aggregate demand.
“The transmission effects of monetary policy on the economy are therefore still very weak. In the Nigerian context, price levels are not interest sensitive. Supply side issues are much more profound drivers of inflation.”
Speaking in the vein, the 1st National Deputy President of NACCIMA, Mr. Kelvin Dele Oye, said that the recent increase of MPR as far as businessmen and manufacturers are concerned does not make sense when funds are not available for borrowing.
Oye said: “We have always asked single digit interest rate. But after the banks have added their charges the interest rate will be around 26 per cent, and it is impossible to run a business at such a high rate. Now, to further increase it is just like saying do not come near the bank anymore and scarring businesses away because it is difficult to sustain any productive activity if you are going to provide your own security.”
Dike Ownwuamaeze
Follow us on:
