Local production-led recovery key for sustainable growth, says LCCI

The Lagos Chamber of Commerce and Industry (LCCI) has predicted that Nigeria would end the current year within the region of -2 and -1 per cent.It thus advocated the need to anchor the economic recovery plan on policies that will boost local production.

To recover from negative growth, the Chamber stated that it would require the fiscal and monetary sides of the economy to promote growth-enhancing and confidence-building policies that would encourage private capital flows to the economy.

The President, LCCI, Toki Mabobunje, at the chamber’s 132nd yearly meeting, said it was imperative for fiscal and monetary authorities to develop a medium-term recovery plan anchored on boosting local productivity, supporting ease of doing business, attracting private investment, developing physical and soft infrastructure, business-friendly regulatory policies, economic diversification and employment generation among others.

On inflation, she said consumer prices have been on the upward trajectory since August 2019, highlighting structural factors such as persistent pressure on food prices due to disruption to the agricultural value chain, higher energy cost following the deregulation of PMS, foreign exchange scarcity, insecurity in key food-producing states and poor infrastructure drove consumer prices to a 31-month high of 14.23 percent in October 2020 as key drivers.

She added that inflationary pressure continues to impact economic agents including households, investors, and businesses while the sustained pressure on domestic prices continues to weaken households’ purchasing power, which she said has also kept the cost of production elevated for businesses with consequent impact on their ability to grow profit margin.

“The uptrend in inflation has equally widened the negative real return rate on investment in the capital market, thereby making the Nigerian investment environment unattractive to foreign investors,” she added.

She said going forward, inflation is expected to sustain its upward trend in the short to medium term as persistent food supply shocks, foreign exchange illiquidity, higher energy costs, potential foreign exchange adjustment, insecurity and social unrest in the northern region, which are all structural factors will continue to mount pressure on domestic consumer prices.

She said the year 2020 is a historic one for the global and domestic economy, characterized significantly by the coronavirus pandemic, adding that all through the year, the world economy, including Nigeria, battled with the health and economic effects of the covid-19 pandemic.

The pandemic she said caused disruption to global supply chains and threw almost every economy across the globe into an unprecedented economic crisis. “Nigeria, in particular, was confronted with a myriad of challenges, including weakening oil price, revenue pressure from oil and non-oil sources, budget disruption, foreign exchange illiquidity, disruption to business and commercial activities, reduced disposable income, escalation in poverty and unemployment rates, as well as reduced investor confidence.

We need to commend the fiscal and monetary authorities, as well as members of the private sector for their efforts in mitigating the adverse effect of this public health crisis on the economic and business environment,” she said.

According to her in recent months, Nigeria had seen a downward trend in the number of confirmed cases of covid-19 and gradual recovery in business activities following the relaxation of the imposed lockdown.

She added that the explicit and implicit cost of the massive destruction caused by the #Endsars protest particularly in Lagos is huge, stressing that the Chamber commiserates with families that lost their loved ones to the protest, and with those whose businesses was negatively impacted directly or indirectly. She noted that the chamber has remained resolute in promoting investment-friendly policies that support private sector development.

“We have been very consistent in our public policy advocacy, particularly in protecting the business interests of our members. We have also kept to our promise of providing quality business development services to our esteemed members and the broader business community,” she added.

She pointed out that real GDP growth contracted by 3.62 per cent in the third quarter which marks the second consecutive decline in national output after a 6.1 per cent contraction in the second quarter.

“This confirms that the Nigerian economy is in a recession. The moderation in the magnitude of the contraction is due to the lifting of global and domestic lockdown measures, which consequently supported the gradual reopening of the economy. With two consecutive quarterly contractions, it means the Nigerian economy is currently in a technical recession, the second economic recession since the 2014 commodity price shock,” she noted.

She stated that more importantly, the contraction reported in the third quarter was largely driven by significantly lower crude production in the third quarter coupled with the lingering effects of the global pandemic.