The Federal Government (FG) has again been advised to sustain its targeted interventions in selected sectors such as agriculture, manufacturing, export infrastructure while on the other, tackling insecurity.
President, Lagos Chamber of Commerce and Industry, Asiwaju Michael Olawale-Cole gave the advice while addressing a press conference Tuesday on the state of economy, in the first quarter of 2023 fiscal year.
“We urge the government to keep track of plans to tackle the menace of oil theft, to boost oil exports and earn more foreign exchange. We also commend the government for the effort made to-date to combat the cartel involved in oil theft. If these efforts had started earlier the nation would have made huge economic gains. We therefore appeal to the government to intensify the efforts” Asiwaju Olawale-Cole said.
LCCI President noted that the removal of fuel subsidies is, amongst others variables, expected to spur investments in domestic refining and petrochemicals and create a significant value chain for the various stakeholders.
He projected that it would release over N3 trillion per annum for social spending as well as create domestic high valued jobs rather than subsidising jobs in other countries at the expense of ours.
He related that the planned removal of fuel subsidies may cause further northward movement of inflation in the short term, saying that one of the best economic decisions to reduce “our unsustainable debts and widespread corruption in that sector. We expect the government to roll out appropriate cushioning or palliative policies and measures before the subsidy removal in the second half of the year. We, in no way, will appreciate disruption in whatsoever form to the economy in the event of subsidy removal”.
Asiwaju Olawale-Cole advised the government to take cognisance of its socio-economic implications, especially with unemployment at the unwholesome rate of about 40 percent.
The LCCI, Asiwaju Olawale-Cole declared is of the view that the government’s fixation on debt accumulation is “unhealthy”.
The Chamber therefore charged FG to explore other avenues, including: “opening equity opprotunities and offloading/ sales of its real estate holdings.
Similarly, it urged government to make the problem of oil theft, with the removal of oil subsidy regime, a thing of the past to help create room for fiscal manipulation.
LCCI President recommended to FG to continuously improve electricity supply and resolve all issues on Discos profitability and reduce consumption costs and address the problem of poor generation and national grid collapse.
“The cost of logistics has gone up due to the poor state of our roads and lack of connectivity amongst farms, factories, and markets. LCCI commends the Federal Government for the recent effort to improve infrastructure, such as the completion of the second niger bridge, which is a key national infrastructure, with immense socio-economic benefits for the contiguous states and indeed the entire nation. The project was funded through the presidential infrastructure development fund (PDIF) created by president muhammadu buhari and managed by the NSIA. LCCI wants to see more of such developments for the benefit of the organised private sector.
“To reduce the shocks from disruptions to supply chains for raw materials, manufacturers should be assisted with subsidised input and more allocation of forex for importation of critical inputs.
“While the central bank of nigeria (CBN) embarks on monetary tightening to tame inflation, it should ensure that targeted concessionary credit to the private sector is sustained for MSMES.
“While all eyes are fixed on inflation and exchange rates management, the authorities must not lose sight of our unhealthy unemployment figure” Asiwaju Olawale-Cole recommended.
Speaking on monetary policy development, Olawale-Cole said it was influenced by external actions and domestic macroeconomic factors in the first quarter of 2023.
He therefore posited: “The external factors were Russia–Ukraine war, declining oil prices, heightened geopolitical tension, global inflationary pressures and monetary policy tightening in major economies, global capital flight. On the other hand, the developments on the domestic front included slow economic recovery, persistent inflationary pressure, general election and declining external reserves.
“Generally, interest rates experienced some increase while the naira weakened;and inflation consistently witnessed some upward trend during the quarter under review”.
LCCI helmsman said further: “During the period under review, the interest rates movement in the money market reflected developments in the banking system credit and liquidity conditions. In furtherance of Central Bank’s monetary policy stance, the MPR was raised to 18.0% in march 2023 from 17.5% in January 2023, while the cash reserve ratio (CRR) and liquidity ratio (LR) remained at 32.5% and 30.0% respectively in march 2023. In addition, the asymmetric corridor around the MPR was retained at +100/-700 basis points”.
He disclosed that interbank rate declined by 1.65% points to 10.35% in January 2023 from the previous month, prime lending rate fell by 0.18% points, to 13.67% in January 2023 from 13.85% in December 2022, while maximum lending rate fell by 1.50% point to 27.63% in January 2023, compared with 29.13 percent a month earlier.
On foreign exchange market, Asiwaju Olawale-Cole indicated that Naira exchange rate recorded disturbing volatility in the first quarter of 2023, adding: “It averaged N460.93/ USD in march 2023 at the official market (I & E rate), from N446.47/ USD in December 2022.
“At the bureau de change (BDC) segment, the naira depreciated to N752.43/USD in march 2023 from N744.5/USD in December 2022. The premium between official (I&E) rate and the BDC rate widened in the quarter under review. The Chamber’s position is that monetary authorities need to liberalise the FX market by unifying the multiple FX rates and ensuring FX rates are market-driven. This, the lcci believes, is critical to enhancing stability, liquidity, and transparency in the FX market. The unification is expected to improve our currency management framework, reduce uncertainties and eliminate arbitrage and round-tripping opprotunities”.
The President recalled that the headline inflation in March 2023 inched upwards to 22.04% compared to 21.91% recorded in february 2023, 0.13% points higher, adding that food inflation in the month was 24.45% on a year-on-year basis, 7.25% points higher compared to march 2022 at 17.20%.
He revealed that the inflationary pressures were primarily attributable to high food and energy prices, clothing and footwears, transport and insecurity, and imported inflation, stating that high governmental spending on the just-concluded general elections and forthcoming census, we foresee a further rise in the inflation rate in the near term.
“The Chamber views that hiking monetary policy rate 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, energy etc. It should also look at ways to improve supply chains as well as cushioning the cost of production” said Olawale-Cole
On National debt, Asiwaju Olawale-Cole said the recent data released by the Debt Management Office (DMO) puts Nigeria’s public debt at N46.25 trillion ($103.11billion) as at end-december 2022 compared to n39.56 trillion ($95.77 billion) in 2021.
He stated: “the growth reflected on both the domestic and external debt. The external debt stock increased to n18.70 trillion (441.69 billion) in 2022 from n15.86 trillion ($38.39 billion) while domestic debt stock went up to N7.55 trillion ($61.42 billion) in 2022 from N23.70 trillion ($57.39 billion) With N10.8 trillion budget deficit projected in the 2023 budget, the country’s debt stock is expected to increase in 2023.
“In the first quarter of 2023, the DMO issued bonds to raise about N2.61 trillion. Nigeria’s national debt may inch up to N77 trillion by the end of this current administration in may 2023 if the cbn’s ways and means of N23.7 trillion is securitised and if the current level of borrowing is sustained. The 2023 budget deficit is expected to be financed mainly by borrowing N7.4 trillion from domestic sources; n1.8 trillion from foreign sources; N1.7 billion from multilateral loan drawdowns; and, privatisation proceeds, N206.18 billion.
“According to the World Bank, debt service cost of Nigeria’s Federal Government will be in the region of 123.4% in excess of revenue. This is coming after the federal government spent a total of N5.24 trillion on debt servicing between January and november 2022, out of its N6.5 trillion retained revenue for the same period, according to the finance ministry. The amount puts the country’s debt service-to-revenue ratio at 80.6 percent for the period under review – a figure far above world bank’s recommended 22.5 percent for low-income countries like Nigeria. We, at the LCCI, frown at borrowing to fund subsidies or support uneconomic ventures. That is, spending the money we do not have – an act which is unsustainable.
Asiwaju Olawale-Cole noted that following the commendable launching of the restructured Ministry of Finance incorporated (MOFI) as the arrowhead of Nigeria’s efforts to optimise national assets by President Muhammadu Buhari on the 1st of February 2023, the Chamber recommended that copious references should henceforth be made to the growth in the stock of financial assets that nigeria owns in corporate equities, real estate and infrastructure spaces and the returns Nigeria is generating on them, each time the government of Nigeria is providing updates on the growth in the stock of the financial liabilities that Nigeria owes and the cost it is incurring on them, to provide local and global observers a balanced picture of our financial position.
“This would motivate national asset managers, led by the MOFI, to grow our assets and the returns on them as well as motivate our national liability managers, led by the DMO, to minimise our liabilities and the costs we incur on them with equal vigour. Indeed, issuance of joint reports by MOFI and DMO would be most ideal going forward.
“One-sided updates on liabilities with no updates on assets when such updates were adequately available could well be blamed for some of the downgrades of Nigeria’s debt issuance risk profile and outlook. The rating outcomes would have been more favourable had updates on assets been provided side-by-side with updates about liabilities” the President stated.
Speaking on recent general elections, Asiwaju Olawale-Cole said LCCI recognised that there were disenchantments with the conduct and outcomes of the elections, still, pleaded with both losers and winners, alike to consider the ‘unintended’ consequences of their words and actions.
“While we urge winners to embrace victory with humility and with a rich sense of inclusiveness, we however pray losers should explore/ seek the legal route for redress if they so desire. Everyone should eschew the use of provocative & uncivil language, hate speeches and actions that will in no way assist the proper functioning of the economy” LCCI boss counseled.
While appreciating the press as worthy partners in projecting the Chamber’s engagement with the government towards creating a more enabling investment environment for the advancement of the Nigerian economy and the good of all investors and all the other stakeholders, Asiwaju Olawale-Cole called on the incoming government to be focused on tackling “the many salient economic issues and making the most of the opportunity given to it by the Nigerian people to serve.
He pledged: “As a private sector advocacy group with the mandate to promote the business community’s interests, the Lagos Chamber of Commerce & Industry shall continue to engage relevant government agencies, the media and other interest groups, where and when necessary, on actionable recommendations for a thriving business community and economy”.
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