EVEN as Nigerians want an urgent end to the difficult economic situation in the country, there are strong indications that the fundamentals that would drive such expectation are not really in place. BusinessWorld Economic Intelligence can reveal that the three major areas that drive the country’s economy are still in crisis, and the economy may not make any dramatic escape from its current state without these areas recording at least 75 per cent recovery. The areas are banking, capital market and the oil and gas sectors.
Unless there is a new financial policy thrust in the first two weeks of the year, the current regulatory stance that governs the banking sector is generally seen as not encouraging other economic activities. There are revelations that the poor lending regime and new reporting framework have made banks look like treasury houses rather than financial intermediaries. Our report noted that if this development does not stop in the first quarter of 2010 the entire economy may run into severe stress.
Further investigations reveal that the big players in the country’s information and communications technology sector are at a crossroads. Our finding is that the year 2010 may be more difficult than many had thought for these players.
BusinessWorld Intelligence can reveal that the shock may be far greater than in the past. ICT sector may have to follow a difficult path. These tendencies carry a high cost. This becomes more obvious as the major consumers of ICT products and services are facing major capital expenditure cuts in their new budget.
The Petroleum Industry Bill (PIB) is seen as the major factor that will send the first shock to the economy followed by the deregulation policy which is expected within the first quarter of 2010.There are strong indications that the legislation is likely to threaten the billion dollar investments that have been earmarked for the various offshore developments that are now on hold. Again the deregulation which may commence this year will break  NNPC’s oil importation monopoly and this will also signal the removal of oil subsidy. If this happens, it means that fuel cost will be higher and this will push up the inflation rates.
The low level of confidence in the capital market has affected fund flows. There are strong indications that this may persist as banks which account for about 65 per cent of the capitalisation in the market may still be held back by the various regulatory guidelines in the system. The fast expanding aviation industry may face serious problems as much of the operators’ funding demands may not be met by the banks.
Experts project that the insurance industry will not see signs of recovery until the stock market and oil industry crises are resolved.