According to the Lagos State Chamber of Commerce and Industry (LCCI), the Central Bank of Nigeria’s (CBN) increase in interest rates and rising energy prices may impede the growth of the nation’s economy in the third quarter (Q3) of this year.
This was revealed by Dr. Michael Olawale-Cole, president of the LCCI, yesterday in Lagos at a media discussion on the state of the Nigerian economy.
Olawale-Cole claims that the Chamber had earlier emphasized the need to focus on supply-side support to lower rising production costs brought on by the high cost of energy and raw materials in order to lessen inflationary pressures facing the economy rather than just raising rates.
He stated that as production costs continued to climb, manufacturing would shrink and job losses would escalate as the price of diesel continued to soar above N800/litre, Jet-A1 was selling for N710/litre, and PMS was fetching more than the N165/litre cap set by the government.
The LCCI President added that if the deteriorating security conditions in many areas of the nation were not addressed, agricultural production, manufacturing value chains, and logistics would continue to be in danger.
Additionally, he stated that the Chamber anticipates Nigeria to face some fiscal challenges brought on by the nation’s massive debt load, which is also accompanied by high debt servicing and high subsidy costs, raising concerns about the possibility of output contraction, production limitations, and recession risks.
It will take well-coordinated fiscal and monetary policies to promote growth-enhancing and confidence-building policies that would encourage private and foreign capital inflows into the economy in order to sustain the pace of recovery in 2022 and navigate through the growing uncertainties in the global economy, according to Olawale-Cole.
Concerning food security, the LCCI boss stated that in order for Nigeria to be self-sufficient in food production, the nation must increase its agricultural output sustainably and reduce dependence on imports. He also issued a dire warning that if nothing is done soon, a food shortage will worsen the plight of the poor.
Additionally, he demanded the elimination of fuel subsidies and the suppression of oil theft to free up financial resources for the funding of infrastructure, health care, and education, as well as subsidies for the creation of goods and services.
In the meantime, he instructed the CBN to start tightening up the money supply to control inflation and make sure that the targeted concessionary lending to the private sector for Medium-Sized, Small-Scale, and Micro-Enterprises is maintained (MSMEs).
“The CBN must start a slow shift to a single exchange rate system and permit a market-reflective exchange rate. In order to strengthen the economy’s productive sectors, enhance investor confidence, and encourage foreign investment inflows, the CBN must also implement more accommodating supply-side policies.
“Structural bottlenecks and governmental restrictions that raise the cost of conducting business must be addressed. In order to encourage private sector participation in the process of economic recovery and growth, a climate for investment that is supportive and favorable is essential.
“The government should take steps to implement cost-reflective rates in the electricity industry since this will draw the necessary investment to increase power supply and potentially put an end to the national grid’s regular outages. Additionally, we should start planning targeted measures to accelerate the use of renewable energy.
The Deputy President of the LCCI, Gabriel Idahosa, noted that the recent increase in food prices confirms that food prices have a significant impact on overall inflation. He added that if nothing is done, the high cost of production brought on by rising fuel prices, currency scarcity, and supply chain disruptions may persist in the short term.
He reaffirmed the Chamber’s stance on the issue, stressing that rate increases alone would not stop the inflation from increasing and recommending the government to spend more money increasing supply and reducing the cost of production.
“As long as we continue importing refined fuels for our teeming population and neighboring countries, the burdensome impact of gasoline expenses on enterprises will stay,” Idahosa remarked.