LCCI Identifies Major Factors that May Negatively Affect Economic Growth In Q3
The Lagos State Chamber of Commerce and Industry (LCCI) has identified two major factors that would negatively affect the growth of the Nigerian economy in the third quarter of 2022.
According to the president of the business group, Dr Michael Olawale-Cole, he said, the interest rate hike by the Central Bank of Nigeria (CBN) and rising energy costs will hold back the growth of the country’s economy in the third quarter (Q3) of this year.
The LCCI President, Dr Michael Olawale-Cole, who was addressing Journalists on the state of the Nigerian economy in Lagos, on Tuesday, said the Chamber had earlier drew the attention of the public to this development, stating that rate increase alone would not curb the inflationary pressures facing the economy.
He urged the policymakers to pay attention to supply-side support to reduce rising production costs caused by the high cost of energy and raw materials.
He stated that the Chamber expects Nigeria to witness some fiscal challenges, occasioned by the country’s huge debt burden, accompanied by high debt servicing and heavy subsidy costs, warning of heightened fears of contracting output, constrained production, and recession risks.
He said the worsening security situation in many parts of the country, would continue to threaten agricultural production, manufacturing value chains and logistics., if it is not properly tackled
He said with the costs of diesel skyrocketing above N800/litre, Jet-A1 at N710/litre, and PMS selling above the government-regulated price of N165/litre, production costs would continue to rise, leading to a decline in manufacturing and increase in job losses.
On food security, the LCCI boss said for Nigeria to be self-sufficient in food production, the country must boost its agricultural output sustainably and discourage dependence on imports, warning of a looming food scarcity, which would worsen the plight of the poor if nothing is done quickly.
Furthermore, he called for the removal of fuel subsidies and for oil theft to be curtailed to provide fiscal space for subsidised production of goods and services as well as for infrastructure, health, and education financing.
Meanwhile, he charged the CBN to embark on monetary tightening to tame inflation, and ensure that targeted concessionary credit to the private sector is sustained for Medium, Small and Micro Enterprises (MSMEs).
“The CBN needs to initiate a gradual transition to a unified exchange rate system and allow for a market reflective exchange rate. The CBN also needs to roll out more friendly supply-side policies to boost productive sectors, bolster investor confidence and help attract foreign investment inflows into the economy.
“There is a need to address structural bottlenecks and regulatory constraints that contribute to the high cost of doing business. A supportive and conducive investment environment is critical in facilitating private sector involvement in the economic recovery and growth process.
“The government should initiate moves towards having cost-reflective tariffs in the power sector as this will attract the needed investment to boost power supply and possibly end the frequent crashes of the national grid. We should also begin to initiate special-purpose interventions in boosting the deployment of renewable energy.”