Inflation, Forex, Debt Servicing strains Nigeria’s economy – LCCI

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.

In a statement titled, “LCCI statement on Nigeria’s economic growth performance,” signed by its Director-General, Dr Chinyere Almona, the chamber noted that even as 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 percent Gross Domestic Product growth recorded in the second quarter of 2022 paled in comparison to 5.01 percent growth posted in the corresponding quarter of 2021.

The statement reads: “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.”

Almona also noted that the oil sector had consistently recorded negative growth for the ninth consecutive quarter, contracting again by -11.8 percent y/y in Q2 2022 following a higher contraction of -26 percent y/y in Q1.

She 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 percent of the government revenue.

The LCCI boss said the growth of 1.2 percent recorded for agriculture and the three percent for manufacturing were comparatively low as against other sectors that grew at above five percent.

This, was also indicative of the threats facing these sectors powering Nigeria’s real sector.

The statement 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, many more production activities might be constrained in the coming months.”

The Lagos Chamber of Commerce called on the Federal Government 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.”

Punch/Hauwa Abu