The Lagos Chamber of Commerce and Industry (LCCI) has admonished the Federal Government of Nigeria to intensify diversification efforts as well as embrace structural reforms to attract private investment in stimulating economic growth.
The President of LCCI, Mrs. Toki Mabogunje who gave the admonition in press briefing in Lagos on Wednesday noted the sustained recovery of the economy albeit growth remains fragile.
Mabogunje observed that according to the National Bureau of Statistics, the economy grew at an average of 2.17 percent between January and September 2019, which she said was below the population growth rate of about 3 percent.
She said that the Chamber also observed that economic growth was not broad-based across sectors adding that in the third quarter of 2019, 10 sectors expanded; six contracted and three recorded moderation in growth.
“We believe the economy is not growing fast enough to create opportunities for the citizens. The economy is still vulnerable to external shocks notably fluctuations in global oil prices. This partly explains why two global credit agencies – Moody and Fitch, recently downgraded our economic outlook from stable to negative on the back of slow fiscal growth and increasing vulnerability to exogenous shocks. We, therefore, urge government, as a matter of urgency to intensify diversification efforts and embrace structural reforms to attract private investment in stimulating economic growth”, she said.
On business environment, the LCCI President recalled that towards the end of year 2019, the World Bank ranked Nigeria among the top ten improvers in its latest Ease of Doing Business Assessment having moved from the 146th position to 131st position globally and from 21st position to 17th position in Africa.
“While we attribute the said progress to efforts of the Presidential Enabling Business Environment Council (PEBEC) and some improvements in government processes, we note that the World Bank failed to adequately capture some realities. We note that many businesses are struggling to survive on the back of multiplicity of levies, infrastructure challenge, sluggish growth, excessive regulation, high cost of credit and government policies.
“Considering the role of business in the economy, we advise government to vigorously implement friendly policies to support expansion of businesses”, she added.
On inflation rate, Mrs. Mabogunje stated, “We note the sustained uptick in headline inflation since September 2019. According to the National Bureau of Statistics, inflation rose to 11.98 percent in December. This marks the fourth consecutive month of rising inflation. Both food and core inflation accelerated to 14.67 percent and 9.33 percent respectively in December.
“Policy makers need to worry about the increasingly intense inflationary conditions, especially the food component of inflation. Rising inflation has a profound welfare effect on citizens as it weakens purchasing power. Heightened food inflation naturally escalates poverty conditions as food is basic to human existence. Intense inflationary pressures also have a negative impact on investment as cost of production and business operations increases. This typically takes a toll on profit margins as sales and turnover declines.
“We believe government can stem rising consumer prices through increased investment in infrastructure especially power and transportation. This would help to bridge supply gaps and reduce transportation costs. Similarly, there is need to address the security concerns in major food-producing areas of the country.”
While maintaining that crude oil still dominated the nation’s export basket even as its major import was refined oil products, she held that the share of crude oil exports in total exports stood at 77 percent between January and September 2019 adding that the mono-product nature of the economy continued to expose the nation to volatility in the global oil market with its attendant consequences on the economy.
“We urge government to intensify its diversification efforts. This is very crucial for the economy to benefit from the African Continental Free Trade Agreement (AfCFTA) scheduled to start on July 1st, 2020”, Mabogunje said.
She continued, “We observed that the naira-dollar rate was pressured towards the end of 2019 on the back of increased foreign portfolio outflows due to the depletion in external reserve. Overall, exchange rate has demonstrated relative stability, supported by the sustained intervention of the Central Bank of Nigeria (CBN). External reserves still hover around the $38 billion threshold, according to official data from the Central Bank of Nigeria. The approach of supporting the reserves with foreign portfolio investment is unsustainable peradventure portfolio investors develop apathy for Nigerian assets.
“Private investment inflows to Nigeria stood at $19.7 billion from the first to third quarter in 2019. The domination of portfolio investment in total capital importation combined with a sustained decline in foreign direct investment highlights the fact that the economy is considered risky by foreign investors.
“Government needs to do a lot more to ensure policy reforms that could attract private investment into the economy. We believe that it would be almost impossible for government to accelerate growth, create job opportunities and alleviate poverty without adequate private investment in the real economy. Promoting foreign direct investment (FDI) and domestic investment require impactful investment in infrastructure, policy consistency and stable macroeconomic environment. We should prioritize foreign direct investment (FDI) over foreign portfolio investment (FPI).”
Photo: LCCI President, Mrs. Toki Mabogunje.
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