LCCI HIGHLIGHT AREAS OF CONCERN, RECOMMENDATIONS TO FG ON POLICY AMENDMENT ALTERNATIVES FOR BETTER EMPOWERMENT OF THE PRIVATE SECTOR
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By Aishat Momoh. O.
The Lagos Chamber of Commerce and Industry (LCCI), has highlighted some areas of concern and to recommendations to the government on policy alternatives that can better empower the private sector to thrive.
This was contained in a statement signed by Asiwaju (DR.) Micheal Olawale-Cole, the President of LCCI, on Tuesday.
The LCCI boss called on the government to be focused on tackling the many salient economic issues and make the most of the opportunity given to it by the Nigerian people to serve.
He stated that the global economy recovery remained moderate in the second quarter of 2023, though forecasted to slow considerably compared to the previous year, amid continued monetary policy tightening to rein in the stubborn inflation trend.
The world bank, in its june 2023 global economic prospects (gep) is positive about its outlook. It increased global growth projection by 0.4 % to 2.1 % compared with an earlier forecast of 1.7 %. This improved growth prospect is attributed to subsiding risks. Inflation has been persistent.
It is, however, projected to decline gradually as demand weakens and commodity prices moderate on the back of longer-term inflation expectations remaining anchored.
“Tight global financial conditions and subdued external demand are expected to weigh in on growth across emerging markets and developing economies (emdes). Global growth could be weaker than anticipated in the event of more widespread banking sector stress or if more persistent inflation pressures prompt tighter-than-expected monetary policy. As a result of tight global financial conditions, borrowing costs will continue to rise, which could lead to financial dislocations in the more vulnerable embeds.
Similarly, the world economic situation and prospects (wesp) mid-year update released by the united nations department of economic and social affairs (un-desa) notes that global economic prospects remain subdued. However, the slowdown in global growth in 2023 is likely to be less severe than previously expected, mainly due to resilient household spending in developed economies and recovery in china.
According to un-desa, global growth is projected to slow to 2.3% in 2023 from 3.1% in 2022, though an upward revision by 0.4% points from the report’s january forecast. Global inflation is projected to decline to 5.2% in 2023 from 7.5% in 2022, mainly due to lower food and energy prices and softening global demand. Amid easing inflationary pressures, the global economy is expected to pick up some momentum in the remaining part of 2023 and 2024.
Finally, on global developments, the 2023 world investment report released by UNCTAD reported that global Foreign Direct Investment (FDI) declined by 12% in 2022 to $1.3 trillion. The significant fall was driven by the global poly-crisis, including the war in Ukraine, high food and energy prices, and debt pressures.”
While speaking on GDP, he said, “Gdp grew by 2.31% (year-on-year) in real terms in the first quarter of 2023, compared to 3.52% recorded in the previous quarter and 3.11% in the corresponding period in 2022. The quarterly growth indicates that the economy remained weak and fragile. However, it showed tenth consecutive growth despite contractionary monetary policies.
The growth in the first quarter was primarily driven by the following sectors: solid minerals 37.71%, services 4.35%, construction 3.27%, and manufacturing 2.83%. The growth recorded in the solid minerals sector was higher when compared to 22.04% in the previous quarter, while the services sector was lower compared to 5.69% in the fourth quarter of 2022. Construction sector growth moderated from 3.80% in the previous quarter.
Real growth in the manufacturing sector continued, though slowed from 2.83% recorded in the fourth quarter of 2022.
The agriculture sector contracted by –0.90% in the first quarter compared to 2.05% in the previous quarter. The decline was due to lower livestock production and the leftover impact of the severe floods in the third quarter of 2022.
Contraction in the oil & gas sector further moderated to –4.21% in the first quarter from –13.38%, indicating a gradual trajectory towards exiting recession. As a result, preventing the country from benefiting fully from higher global oil prices. The outlook for oil & gas is positive due to the resolution of some maintenance issues and partial recovery. Production levels are expected to continue recovery, with a high risk of reversal due to insecurity, theft, vandalism, force majure events, and lack of payment discipline.
The significant improvement in the oil and gas sector is attributed to the improved daily oil production, estimated at 1.51 million barrels per day (mbpd) in the first quarter from 1.34 mbpd in the previous quarter, due to reduced oil theft and improved security. Sustained growth in the manufacturing sector may be attributed to resilient consumer spending and improvement in electricity supply. However, growth in the manufacturing sector remained subdued due to high inflation, continuous rise in interest rate, forex scarcity, high energy cost (due to subsidy removal and electricity tariff), and weakening purchasing power which could weigh further on the growth prospects of the sector.
In the short term, growth in manufacturing is expected to remain weak due to squeezed consumer spending, while the outlook in the medium term is projected to improve due to subsidy removal which may attract investment in oil refining and other opportunities in the sector.”
The federal government needs focus on addressing the security challenges that have plagued the business community and negatively affected investment inflows. My hope is that this new political era will witness a marked improvement in terms of the state and fate of national security in Nigeria.
The federal government needs to sustain its targeted interventions in critical sectors like agriculture, manufacturing, export infrastructure.
We urge the government to keep track of plans to tackle the menace of oil theft to boost oil exports and earn more foreign exchange. We also commend the government for the effort made to date to combat the cartels involved in oil theft. If these efforts had started earlier, the nation would have made huge economic gains. The chamber therefore appeals to the government to intensify the efforts.
We commend the government on the two policy reforms: subsidy removal and exchange rate harmonization. We expect the policies to be sustained and impact positively on investment, fiscal and external sectors.
In a bid to ensure competition and eliminate unfair advantage, all importers of petroleum products, including NNPC limited, must have equal access to the foreign exchange market. Also, we urge the government to ensure transparent pricing mechanisms to eliminate any form of exploitation. We expect the government to roll out appropriate cushioning or palliative policies and measures.
We advocate that more policy reforms should be embarked upon by the government to improve the business environment, boost investor confidence, stimulate economic growth, create more employment and alleviate poverty.
Continuously improve electricity supply and resolve all issues on disco profitability and reduce consumption costs and address the problem of poor generation.
The cost of logistics has gone up due to the poor state of our roads and the inadequate connectivity amongst farms, factories, and markets. The LCCI commends the federal government for the recent effort to improve infrastructure, such as the completion of the second Niger bridge, which is a key national infrastructure. LCCI would like to see more of such developments for the organized private sector’s benefit.
To reduce the shocks from disruptions to supply chains for raw materials, manufacturers should be assisted with subsidized input and more allocation of forex for the importation of critical inputs.
While the central bank of Nigeria (CBN) embarks on monetary tightening to tame inflation, it should ensure that targeted concessionary credit to the private sector is sustained for memes.
While all eyes are fixed on inflation and exchange rates management, the authorities must not lose sight of the unhealthy unemployment figure.
Monetary policy development
In quarter two, monetary policy was influenced by external and domestic macroeconomic factors. The external factors include the tightening of global monetary policy in response to high inflation and global capital flight. Domestic macroeconomic factors include persistent inflationary pressure, political transition, and declining external reserves.
Interest rate”
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