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By Dr Timi Austen-Peters, Chairman of Dorman Long Engineering Ltd
Nigeria was one of the hardest-hit economies in 2020, suffering from a perfect storm of our over-dependence on oil and its depressed price, the COVID-19 pandemic and consequent lockdowns and the end-SARS protests. As a result, Nigeria’s economic growth has stalled and even declined dramatically, with its currency falling to an all-time low. Investors’ confidence in the Nigerian economy has waned. This has resulted in a sharp drop in Foreign Direct Investment (FDI), further exacerbated by inconsistent monetary policies by the Federal Government of Nigeria. The efforts of the Central Bank of Nigeria in formulating stringent policies have not saved the free fall of the Naira.
The effective implementation of the 2021 National Budget will be pivotal to recovery. The Federal Government is optimistic that the budget will help to stimulate and attract investments to lift the economy out of the current recession, which has significantly affected businesses in all sectors.
Savings of all descriptions, including pension savings under the Pension Reform Act, have come under pressure from increased withdrawals, as many Nigerians who lost their jobs drew down on their nest eggs to meet the torrential storm of rainy days which made up 2020.
The FGN seems ready to finally break the jinx associated with the Petroleum Industry Bill, PIB. The latest version of the PIB was forwarded to the National Assembly in September 2020 and it has already gone through its first readings at the Senate and the House of Representatives. Full deliberation and stakeholder participation should take place Q1 2021. The Bill addresses governance, administration, host communities and finances for the industry. It also contains many provisions that together will provide a robust framework for better protection of the environment. If passed, it should provide the clarity required to promote the much-needed investment in the hydrocarbon industry and this will have a positive ancillary effect on the economy as a whole.
The Asset Management Corporation of Nigeria, AMCON, was established in 2010 in order to acquire assets (debts) from eligible financial institutions. The idea was particularly to free up the balance sheets of banks that were encumbered by non- or under-performing loans, thus permitting the banks to go about their business with less dead wood, and for AMCON to put those acquired assets to as good use as possible. AMCON has continued to undertake these developmental and remedial roles, it has also significantly ramped up its performance in the area of enforcement, including against a number of high profile bank debtors.
The capital market under the regulation of the Securities and Exchange Commission (SEC) witnessed a significant increase in the deployment of automation, IT and other necessary infrastructure occasioned by the need for all to work remotely from their physical offices. This is a long-overdue development spurred on by the lockdowns. There were mixed results in the volume of trades which recorded significant increase in volumes during the first and last quarters of the year, in part brought on by the low interest rates in the money markets.
The National Pension Commission, PENCOM, has continued to regulate the pension industry. Beyond overseeing record withdrawals from Retirement Savings Accounts, by account-holders to meet the challenges of being laid off and the inclement economic climate as mentioned above, PENCOM also launched the Retirement Savings Account Transfer System. This will inject greater competition amongst PFAs for the benefit of account holders who can increasingly change PFAs, presumably in the search for greater returns. The increased competition will hopefully create a more vibrant and customer – satisfaction driven industry while delivering improved profitability and increased efficiency.
The year 2020 that started with so much promise for engineering firms banking on the burgeoning growth in commercial activity that was due to continue from the end of 2019 rapidly slowed down to a dead halt. That down time was spent by many engineering firms, including ourselves, reviewing how we could adapt to the new situation. An increased reliance on IT was the number one response since neither we nor our clients could work from our offices and workshops. As the year progressed, it became apparent that much of the work that we feared had evaporated was actually simply in hibernation. The last quarter of 2020 proved to be a lot busier than we had thought would be the case, with work that had been suspended coming back on stream, as well as some unanticipated work being awarded. Some maintenance work, emergency fabrication and logistics support were some of the bright spots.
In spite of the many challenges which characterized the business environment in 2020, Nigeria’s essential economic fundamentals remain solid and the present administration’s economic diversification drive recorded modest improvements and opened up new opportunities in a number of sectors. We have a large and young population that is desirous of consuming diverse products and services. Service industries from IT, to Fintech and the perennial winners of music and cinema are increasingly prominent both locally and on the world stage as sectors of the economy to reckon with. Of direct relevance to us at Dorman Long as they lead to work for us, telecommunications companies have rushed to maintain their 2020 programme of investments by packing as much as they could into the last 2 quarters, renewable energy and agriculture are also jostling to take their space in the economy. This has led to significant investments translating to work for us. All of these have created the foundation for a more stable and optimistic business environment in 2021.
There are a number of significant projects which are planned to come on stream, some of which will directly contribute to work for Dorman Long, including Train 7 of the NLNG and other gas feeder projects for this.
We at Dorman Long remain devoted to our vision of maintaining pre-eminence in the provision of specialist engineering services for which we are known both in Nigeria and internationally. We affirm that Dorman Long is favourably positioned and prepared to support our clients and partners through the challenges and opportunities that await us all in 2021. On behalf of everybody at Dorman Long, I wish you a prosperous 2021!