The Lagos Chamber of Commerce and Industry has said that rising inflationary pressure, forex challenges, debt servicing and weak revenue generation have put a serious strain on the Nigerian economy, just as the country moves towards stagflation.
In a statement titled, “LCCI statement on Nigeria’s economic growth performance,” and signed by its Director-General, Dr Chinyere Almona, the chamber noted that even though the economy recorded an impressive recovery from the recession induced by the COVID-19 pandemic in 2020, it might drift into stagflation if these issues were not addressed.
According to LCCI, the 3.4 per cent Gross Domestic Product growth recorded in the second quarter of 2022 paled in comparison to 5.01 per cent growth posted in the corresponding quarter of 2021.
The Nigerian economy has recorded an impressive recovery from the recession induced by the COVID-19 pandemic in 2020. The economy has recorded growth rates in recent quarters.
The statement reads in part, “However, the economy has continued to struggle with many inhibiting burdens like inflation, weak revenue generation, degenerated infrastructure, forex challenges, unsustainable cost profile seen in debt services and subsidy payments, and the daunting threats of worsening insecurity. The Chamber is concerned that if we continue in this trajectory, the economy may bleed away into a stagflation which will impact on production cost, job losses, worsened forex crisis, and dampened growth in the medium term.”
The chamber also noted that the oil sector had consistently recorded negative growths for the ninth consecutive quarter, contracting again by -11.8 per cent y/y in Q2 2022 following a higher contraction of -26 per cent y/y in Q1.
It advised the government to dedicate more attention and resources to tackling the menace of oil theft and pipeline vandalism since the oil sector made up about 80 per cent of the government revenue.
It said the growth of 1.2 per cent recorded for agriculture and the three per cent for manufacturing were comparatively low as against other sectors that grew at above five per cent.
This, the LCCI said, was also indicative of the threats facing these sectors powering Nigeria’s real sector. It added that the woes in these two sectors were responsible for the frightening rise in the inflation rate.
With the excruciating burden from debt service, subsidy payments and worsening insecurity, more production activities might be constrained in the coming months, it noted.
The statement further reads, “The Federal Government needs to sustain its targeted interventions in selected critical sectors like agriculture, manufacturing, export infrastructure, tackling insecurity, and free more money from subsidy payments.
“It is also worrisome that the 2023 budget estimations indicate that there may not be any significant allocation to capital projects in 2023. We urge the government to tackle oil theft to earn more foreign exchange, borrow from cheaper sources to reduce the burden of debt servicing, and take a decisive step towards removing fuel subsidies.”