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‘Scarcity of forex taking toll on capacity utilisation, business recovery’

By Femi Adekoya
06 October 2021   |   3:11 am
The Lagos Chamber of Commerce and Industry (LCCI) has expressed concerns over businesses’ inability to access foreign exchange for the importation of raw materials for production

[FILES] A man exchanges Nigeria’s currency Naira for US dollars in Lagos, Nigeria, on April 19, 2021. (Photo by PIUS UTOMI EKPEI / AFP)

The Lagos Chamber of Commerce and Industry (LCCI) has expressed concerns over businesses’ inability to access foreign exchange for the importation of raw materials for production, noting that operators are still experiencing liquidity challenges.

The president, LCCI, Toki Mabogunje, at a press briefing on the state of the economy, explained that many investors are still lamenting the difficulty of accessing foreign exchange, adding that the situation is taking a huge toll on capacity utilisation, recovery and sustainability of businesses in the production sector.

She, however, stated the need for the government to explore private sector collaboration in infrastructural development in the light of prevailing fiscal conditions.

According to her, while the government explores the issuance of Diaspora bonds targeted at specific projects, equity options, which have proven to be more sustainable and cost-effective than debt, should be considered.

“Connecting local assets to global liquidity by transferring a certain portion of ownership in key state enterprises to private investors would greatly encourage investment inflows into the economy and unlock revenue opportunities for the government.

“Furthermore, we restate our position on the need for the government to ensure that borrowed funds are tied to specific assets with prospects for sustaining the productive capacity of the economy”, she said.

According to her, Nigeria’s actual output performance is still below its potential output level as recorded in the pre-Covid-19 period, pointing out that achieving key development outcomes such as employment creation and poverty reduction will always remain elusive in the light of fragile recovery.

She stated the need for policymakers to pursue critical reforms to bolster confidence in the economy, accelerate post-pandemic recovery and alleviate poverty.

The LCCI boss added that accelerating the pace of recovery requires both fiscal and monetary policymakers to be well-coordinated in promoting growth-enhancing and confidence-building policies that would encourage private and foreign capital inflows into the economy.

She also called for deliberate efforts towards making the business environment more conducive for MSMEs and large corporations at the national, subnational, and local government levels.

“This can be achieved by addressing the structural bottlenecks and regulatory constraints contributing to the high cost of doing business. A supportive and conducive investment environment is critical in facilitating private sector involvement in the economic recovery process. Beyond the issues around the collection and distribution of the Value Added Tax (VAT), the government must become more concerned about the needs of the goose that lays the eggs, the private sector,” she advised.

On the Petroleum Industry Act (PIA) 2021 signed into law, she noted that expectations are high, as the country seeks to deepen deregulation efforts in the downstream oil industry by ensuring a market-reflective pricing model for petroleum products; saying that the successful implementation of the PIA is expected to drive private investment in the oil & gas sector, and would intensify diversification efforts within the oil sector to gas and other petrochemical products.

“The clarity in the government’s policy direction by ensuring consistency in economic policies. Policy consistency is imperative for long-term investment planning and business projections. Holistic and dynamic review of the security architecture to address the seemingly worsening security situation in the country,” she added.

She noted with serious concerns the worsening security situation in the country, warning that banditry attacks, abduction, herders-farmers conflict, vandalism, and insurgency have become recurring incidences in Nigeria.

She said the impact of these crises on the Nigerian economy remains profound and multi-dimensional, as the crisis has crippled lots of private and public investments across the nations.

She added that many households have lost their means of livelihood. Many farmlands across the country have been destroyed with a consequent impact on food production and security.