Though theoutgone year2011, had been very eventful, memorable and full of intrigues, not a few believe that the new year may surpass the outgone in terms of its impact on Nigerians, the nation's business environment and investments generally.For instance, the presentation of the 2012 budget of N4.749trillion, an increase of six per cent over the N4.484trillion of the previous year, at the twilight of 2011, gives an insight into the direction individual and corporate expenditure may go this year, especially with the planned removal of oil subsidy, scheduled to commence in April when its implementation is expected to commence.The Marketing Communications IndustryExperts from this industry have argued that the lull experienced in the sector in 2011 may continue, unless there are conscious efforts at re-energising the real sector of the economy and making the nation's industries work. To many of these analysts, year 2012 would further compound the woes of the consumer, since the planned removal of oil subsidy would, without doubt, whittle down his purchasing power.With the planned removal of subsidy on petroleum products and increases in tariffs on wheat and rice, among others, coupled with the expected attendant effects, experts believe Nigerians must brace up for another belt-tightening year.'It is an industry that relies heavily on the real sector and others to survive. For instance, if companies are folding up, then what products are we going to be left with to market', argued Austin Udueni, a marketing communications practitioners, while projecting into the new year.The implications for the consumers, he argued, were not too positive, since the government has not actually unfolded an effective strategy aimed at frontally tackling mass unemployment and inflation, two issues that have continued to punch holes in the pocket of Nigerians.He argued that while consumers' financial power would be completely whittled down, brand owners would have to think out of the box to attract the patronage of these consumers, whose dwindling economic fortunes would have reduced their instincts for impulsive buying.For Biyi Adesuyi, a finance expert and marketer, the implications of this year's budget for the consumers are very grave. Adesuyi believed the budget would have a negative impact on the consumers next year.'The fact that he has to pay more now for fuel without any plans by the government to cushion the effect of the hardship this might cause, makes him vulnerable,' he argued.He noted that the average Nigerians spent the bulk of their incomes on food, especially bread and rice, due to their low social and economic status.'Unfortunately, the prices of bread and rice, which are two commonest foods among the people may go up astronomically, next year, since the government has decided to impose 65 per cent and 30 per cent levies on wheat flour and rice importations respectively.'What this means in effect is that apart from paying more for fuel, they will also pay more for the basic food items, without an increase in their remunerations. By the time they are through with all these, they may be left with little or nothing to attend to other needs,' he stated.He argued that if the government had really been sincere about enhancing the consumers' buying power, it should have dedicated the lion share of its budget to projects like agriculture that can fast track the growth of the economy.He believed the allocation of a huge sum of N921.91 billion on security compare to a paltry sum of N78.98billion on agriculture which has the potential of creating jobs and enhancing the spending powers of Nigerians, was rather misplaced, adding that not much had been put in place to ensure that the money allocated in the budget for security was used for that purpose.Corroborating the above view, a marketing communication expert and CEO, NextMedia, Dada Ajai-Ikhile, described the budget as 'another way of asking Nigerians to tighten up their belts'.'With the removal of oil subsidy, the average Nigerian would spend more on those basic things he used to take for granted; since the removal of that subsidy would affect the price of almost everything.'So consumption will be affected. Spending on those things that are not very basic will no doubt be checked. The amount of money disposable towards telecoms, relaxations and all those things that are not very basic will be affected too.Ajai opined that manufacturers and brand owners would have to adopt strategies that would make their goods and services irresistible to the consumers.'The brands that are not able to come up with the right strategy would definitely suffer. What we may likely be seeing as a response to the trying times from brand owners will be frequent family promotional activities just to keep the people buying,' he stated.Oil and GasInvestment apathy might continue in the nation's oil sector. The reason for this may not be unconnected with the non-passage of the controversial Petroleum Industry Bill (PIB) in the previous year. There were series of promises to ensure the bill became law in the year 2011, but all to no avail, with the latest pledge being that the Federal Government would pass the bill in the first quarter of 2012.The PIB aims to establish the legal and regulatory framework, institutions and regulatory authorities for the Nigerian petroleum industry, to establish guidelines for the operation of the upstream and downstream sectors.However, hundreds of billions of dollars in investment worth were withheld by the International Oil Companies (IOCs) for the fear that the Bill might not favour them if passed into law.Moreover, the 2012 budget as presented by President Goodluck Jonathan did not make provisions for such anticipated investment by the public sector. Over 70 per cent of the 2012 budget will be financed by oil revenues with crude oil price benchmarked at $70 per barrel.The budget also confirmed the removal of fuel subsidy come April 1, 2012 when the implementation of the budget is expected to commence. The effect of subsidy removal cannot be imagined because a litre of petrol will cost between N130-N150 depending on the crude price at the international market. Transportation fares will skyrocket, inflation rate will soar and cost of living will worsen at least in the short term assuming the Federal Government actually has effective palliative measures to cushion the effects on the economy as postulated by the government's economic team.Information TechnologyThe creation of Communication Technology Ministry by the president, six months ago, gave the impression that he had realised the importance of ICT to economic development of Nigeria. However, his proposed budget submitted to the Natiomal Assembly betrays his inconsistency. According to the budget, the Ministry of Communication Technology would receive a total allocation of N18.31-billion, while the Ministry of Science and Technology would get N30.84 billion. This is a contrast to the 2011 budget which gave the Ministry of Information and Communication N30.39 billion, and the Ministry of Science and Technology N48.73 billion.In essence, the Communications Technology Ministry received N12.08 billion less while the government is giving N921.91 billion to Security, N400.15 billion to education, and N180.8 billion to works, N282.77billion to health and about N161.42billion to power.In his appraisal of the budget, the chairman of Zinox Technologies, Mr Leo Stan Ekeh, described the budget as 'falling short of expectation given what obtains in the so called developed economies'. Looking at the budget vis-a-vis the roadmap of the ministry of communication technology towards solving the country's myriad economic problems, it can be postulated that Nigerians might be singing the usual old songs of economic hardship at the expiration of the 2012 budget.'Does he know that with broadband internet everywhere in the country, insecurity can be tackled'' he asked.Real SectorFor 2012, stakeholders in the manufacturing sector envisaged a sharp increase in the price of staple commodities going by the parameters concerning the sector in the budget.It is also posited that due to the planned removal of fuel subsidy in 2012, the cost of production is expected to increase with its attendant effect tricking down to the consumer market.Citing a strong example of the challenges consumers might have to face in the coming year, the Lagos Chamber of Commerce and Industry (LCCI) lamented the tariff increase on wheat flour to 100 per cent and on rice to 50 per cent, which is contained in the 2012 budget, noting that it posed a major threat to food security in the country.Wheat, used for the production of bread and rice, is the most common staple food item consumed by majority of Nigerians across the various strata of the society and any increase in the prices of these commodities will put more Nigerians at risk of food insecurity.The Director-General, LCCI, Mr Muda Yusuf, was of the opinion that the policy, which would take effect from July 1, 2012, will only bring nothing but an astronomical increase in price of Fast Moving Consumer Goods (FMCG) in the nation.He said the policy proposition on the tariff reviews posed risks for the economy and the welfare of the citizens.The proposition is that with this policy, the citizens will patronize locally produced food products. But there is a need for caution. Protectionist policies work better if there is critical mass of investment in local capacity to fill the supply side gaps that would be created by such policies; and where there is institutional capacity to enforce compliance,' he said.Yusuf added that the tariff review would worsen the poverty conditions of Nigerians 'as the price of the two major staple foods, rice and bread, will increase considerably. This will make smuggling of the products, especially rice to increase and make the Nigeria ports and maritime sector players lose business to the ports of neighbouring countries.'He also said that new incentives for corruption in the customs would be creating loss of revenue to government.'There would be serious social consequences arising from the discontent by the poor,' he said.He pointed out that increasing tariff on staple foods is a very delicate and risky thing to do especially in a country with ravaging poverty and major crisis of unemployment.What was presented was only a marginal reduction in recurrent budget, which was reduced from 74.4 per cent to 72 per cent of the total budget compared to 2011 budget, a mere 2.4 per cent reduction. This is not a significant reduction.'In an economy that is in dire need of infrastructure investment, committing 72 per cent of the budget to recurrent spending would not promote the cause of economic transformation,' he said.Money MarketExperts here call for cautious optimism. A look at some of the provisions showed that the recurrent expenditure accounted for 75 per cent of the total spending plan, representing a marginal 2.4 per cent, a decrease from the 74.4 per cent in this year's appropriation. The capital expenditure has an allocation of N1.32 trillion, representing a 15 per cent increase over the amount approved in this year's budget.Also provided in the budget is a projected exchange rate of N155/US1$; GDP growth rate of 7.2 per cent and inflation rate of 9.5 per cent.Though President Goodluck Jonathan had described the budget as a stepping stone to the transformation of the Nigerian economy, analysts see the various projections as quite ambitious, thereby calling for cautious optimism. They opined that the exchange rate, inflation and the GDP target were not realisable against the backdrop of current development in the global economy which has direct relationship with the Nigerian economic sphere.According to the CBN governor, there was the urgent need to look at the constitution on the number of elected officials and retinue of assistants.A renowned economist and university lecturer, Dr Osaro Obobaifoh, described a situation whereby about 75 per cent of the budget was set aside to pay salaries of politicians and public office holders, who are less than five per cent of the population, as detestable.He noted that the allocation for recurrent expenditure inferred that the current admini-stration had no plan to develop the economy, stressing that no economy all over the world could grow without proper attention to infrastructure.On her part, Head of Africa research at Standard Chartered, Razia Khan observed that 'While markets may initially react positively to the announcement that the fiscal deficit is likely to narrow further as well as the slight reduction in the proportion of recurrent expenditure, we caution that there are still significant concerns,'On his part, the Managing Director and Chief Executive Officer, Cowry Assets Management Limited, Mr Johnson Chukwu, said the appropriation bill signposts the likely improvement in the fiscal policy in the next four years.Chukwu also argued that Federal Government's proposal with lower deficit and improved capital expenditure allocation, amongst others, was obviously a significant improvement over last year's budget.Analyst also believe that dependence on financing the budget on oil revenues, as against domestically generated revenue, makes the forecast of domestic growth redundant, adding that the proposed spending figure was still too high, and would require the monetary authorities to do even more to offset the liquidity impact of increased spending.Capital MarketThe CEO, Lambeth Trust & Investment Company Ltd, David Adonri, believes unfolding events in the global economy, will likely define the state of the nation's capital market and by extension her macro economy, in 2012. If events are favourable and the integrity of the domestic macro economy is sustained, the huge deficit in proposed public spending may still perpetuate a high Interest rate regime that will favour the debt market over equities.He, however, argued that two events may enhance competitiveness of equities. 'First is the improving fundamentals of publicly quoted companies and secondly, removal of fuel subsidy which may reduce the need for government to operate with borrowed funds.'At the institutional level, an event that can reshape the capital market is commencement of trading on the OTC platform of Nigerian Association of Securities Dealers (NASD) possibly in 2012. It shall herald a new era of competition that will certainly redefine securities trading in Nigeria.
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