Nigeria’s economy remains fragile, says LCCI
• Raises concerns on forex liquidity
The Lagos Chamber of Commerce & Industry (LCCI) has expressed concerns over the state of the economy, insisting that the nation’s economy remains fragile.
President, Lagos Chamber of Commerce & Industry (LCCI), Toki Mabogunje in a chat with The Nation observed that exit from recession did not imply an end to Nigeria’s numerous economic woes as the growth of the economy remained a problem.
According to her, apart from fragility in growth, the economy is faced with several challenges, including rising consumer prices, weak employment level, lingering liquidity concerns in the foreign exchange market, depressed purchasing power, weak investor confidence, persisting external vulnerabilities and security concerns.
She lamented that the weak performance of the oil sector reflects the peculiar regulatory and policy concerns in the sector.
“Of the major 19 sectors, seven sectors including ICT, 14.7 per cent, agriculture, 3.42 per cent, and real estate, 2.81 per cent expanded in the fourth quarter while the other 12 sectors, including manufacturing,-1.51 per cent, trade, -3.2 per cent, and transportation and storage, -5.95 per cent, reported contraction,” Mabogunje said.
She stressed that the sub-optimal performance highlights the lingering effect of pandemic-related disruptions and numerous investment climate issues bothering many sectors of the economy.
She 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 capital inflows into the economy.
She advised that some measures were imperative in sustaining growth recovery in the short-to- medium term, noting that governments at national and sub-national levels need to intensify commitment towards creating a supportive and conducive investment environment to facilitate private sector involvement in economic recovery process.
“It is imperative to deepen reforms particularly in the country’s oil and gas industry to bolster investor confidence and stimulate healthy competition, including deliberate efforts by policymakers towards addressing the numerous structural bottlenecks stifling the ease of doing business.
“The country’s foreign exchange management framework needs to be reviewed to expand the scope of market mechanism in the determination of the exchange rate. This is even more imperative in the process of attracting new investments and retaining existing ones,” Mabogunje said.
She lamented the persistent increase in domestic prices, pointing out that the continued uptrend in headline inflation was being fuelled by persistent food price pressure, with food inflation rising to yet another record high.
According to her, the key inflationary drivers are basically supply-side issues, which are beyond monetary policy control, security concerns in Northern and Middle Belt region, which has continued to disrupt agriculture in those areas, high cost of transporting food commodities from farms to markets as a result of elevated energy prices and the lingering productivity issues in the agricultural sector, leading to weak output outcomes.
She decried the lingering foreign exchange liquidity concerns, evidenced by the widening disparity between parallel market rate and Nigerian Autonomous Foreign Exchange Rate (NAFEX), elevated energy prices, the upward adjustment of electricity tariffs and cargo clearing challenges at the ports.
“Continued uptick in inflation has profound implications for all stakeholders in the economy including households, businesses, and investors as it weakens purchasing power and consequently worsens the poverty conditions. This further escalates operating and production costs and erodes profit margins; and ultimately undermines investors’ confidence.
“Galloping inflation complicates the pursuance of the price stabilization mandate of the Central Bank of Nigeria (CBN) even at a time the bank is deepening its intervention efforts to boost credit flows to the real economy,” Mabogunje said.
She berated the divergent positions of both the fiscal and monetary authorities regarding the country’s foreign exchange framework.
According to her lack the lack of cohesion among policymakers sends a negative signal to the investment community, worsens uncertainty, and further dampens investor confidence.
She advised on the need for the fiscal authorities, CBN and Economic Advisory Council to be on the same page as far as the country’s foreign exchange policy framework is concerned.
She reiterated the need for the nation’s foreign exchange policy to be reviewed to expand the scope of market mechanism in the determination of exchange rate. According to her it is critically important for policymakers to harmonise the multiple exchange rates into a single market-reflective rate.