The Lagos Chamber of Commerce and Industry (LCCI) has called on the Central Bank of Nigeria (CBN) to urgently lift foreign exchange (forex) restrictions on the importation of the 43 products to enhance the consistency of the liberalisation of the market.

The chamber also alerted a further rise in the inflation rate due to floating of naira and premium motor spirit subsidy removal.

The country’s economy has remained weak and fragile following the growth recorded in the first quarter of the year, LCCI said.

Addressing the state of the economy yesterday, the president, Dr Michael Olawale-Cole, said the GDP grew by 2.31per cent year-on-year in real terms in the first quarter of 2023, compared to 3.52 per cent recorded in the previous quarter and 3.11per cent in the corresponding period last year.

He said this indicates that the economy remained weak, even with its tenth consecutive growth and contractionary monetary policies. Noting that the growth in Q1 was primarily driven by solid minerals (37.71 per cent), services (4.35 per cent), construction (3.27 per cent) and manufacturing (2.83 per cent), he stated that the progress recorded in the solid minerals sector was higher when compared to 22.04 per cent in the previous quarter.

“Construction sector growth moderated from 3.80 per cent in the previous quarter, while real growth in the manufacturing sector continued, though slowed from 2.83 per cent recorded in the fourth quarter of 2022. The agriculture sector contracted by –0.90 per cent in the first quarter compared to 2.05 per cent 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 and gas sector further moderated to –4.21 per cent in the first quarter from –13.38 per cent, indicating a gradual trajectory towards exiting recession,” he said.

He added that growth in the manufacturing sector remained subdued due to high inflation, continuous rise in interest rate, forex scarcity, high energy costs (due to subsidy removal and rising electricity tariff), and weakening purchasing power which could weigh further on the growth prospects of the sector. “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.

According to him, the global economic recovery remained moderate in the second quarter of this year, though forecasted to slow considerably compared to the previous year, amid continued monetary policy tightening to rein in inflation. The World Bank, in its June 2023 Global Economic Prospects (GEP) said it is positive about its outlook as it increased its global growth projection to 2.1 per cent compared with an earlier forecast of 1.7 per cent. He added that tight global financial conditions and subdued external demand are expected to weigh in on growth across Emerging Markets and Developing Economies (EMDES) such as Nigeria.

According to the United Nations Department of Economic and Social Affairs (UN-DESA), global growth is projected to slow to 2.3 per cent from 3.1 per cent in 2022. Global inflation is projected to decline to 5.2 per cent in 2023 from 7.5 per cent in 2022, mainly due to lower food and energy prices and softening global demand.

Offering recommendations, he said the federal government needs to focus on addressing the security challenges plaguing the business community and negatively affecting investment inflows, sustain targeted interventions in critical sectors like agriculture, manufacturing and export infrastructure; tackle oil theft to boost oil exports and earn more foreign exchange. He also said that to ensure competition and eliminate unfair advantage, all importers of petroleum products, including NNPC, must have equal access to the FX market.

“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. The cost of logistics has gone up due to the poor state of our roads and the inadequate connectivity amongst farms, factories and markets. Manufacturers should be assisted with subsidised input and more allocation of FX for the importation of critical inputs.

In Q2, 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.

“Monetary Policy Rate (MPR) was raised to 18.5 per cent in May 2023 from 18.0 per cent in March 2023, while the Cash Reserve Ratio (CRR) and Liquidity Ratio (LR) remained at 32.5 per cent and 30.0 per cent respectively in May 2023.”

“Increasing the MPR has, thus far, proven to be ineffective and insufficient in taming inflation. Therefore, there is a clear need for the government to strengthen its support to critical sectors like agriculture, power and energy. It should also look at ways to improve supply chains as well as cushion the cost of production,” he said.

Commenting on rising debts, he urged the government to explore other avenues to manage debt, including opening equity opportunities and offloading and selling off some of its real estate holdings.

On palliatives the federal government intends to provide to Nigerians, he said they are very concerned about the implementation of the distribution of funds. “How would the poor 12 million households in Nigeria be determined? What parameters and channels will the government use to distribute the money? For this form of palliative to make any meaningful impact, it must be managed appropriately and transparently.”

Supporting the government’s readiness to declare a state of emergency on revenue generation, he said the chamber’s perspectives are in tandem with the government’s need to check the over-bloated and inefficient workforce of the ministries, departments, and agencies (MDAs). “Any action aimed at enhancing efficiency and ensuring the ease of doing business must be done with adequate consultation with stakeholders.

While we commend the government on some of its recent measures to stop wasteful spending, we urge the administration to halt the revenue leakage of more than $5 billion paid as freight to foreign ship owners and focus on tackling the many salient economic issues beleaguering the country’s economy.