On October 1, 2022, Nigeria celebrated 62 years as an independent nation. How has the country fared economically? This detailed examination was carried out by the Lagos Chamber of Commerce and Industry (LCCI) in its independence anniversary statement titled, “The Nigerian Economy at 62: The Need for Big Decisions”. According to the Director-General of LCCI, Dr. Chinyere Almona, in the last 62 years, the Nigerian economy had performed along the line of what policy mix used to drive the economy that had significantly transformed from a largely independent agrarian economy to a net importer of finished goods. As it is, the economy is now financed mainly by oil revenue, which had exposed the economy to effects of external shocks while joining Nigerians to manifest the 1st October spirit in the celebration.
The chamber recalls that after independence, Nigeria witnessed a rebirth in 1999, which is 23 years ago with the return to democratic administration after a protracted military rule. The Nigerian nation had survived threats of a civil war recurrence and had remained a united nation with the hope of a return to greater glory. The 23 years of uninterrupted democracy in Nigeria had earned the country enormous goodwill as one of the few stable democracies in Africa. The chamber highlights that core democratic values and ideals needed to be given more state attention in a bid to have firmer roots, especially in the following respects: transparency in the management of public finance; rule of law; separation of powers and the inherent checks and balances; quality and independence of democratic institutions such as electoral bodies, law enforcement agencies and judiciary; citizen engagement in the democratic process; and the practice of true federalism.
The DG affirms that LCCI recognises that the Nigerian democracy is still a work in progress, but as in many advanced democracies, it is crucial to recognise the importance of these democratic ideals to sustaining our democracy and ensuring the advancement of the common good for all citizens. And that very recently, “A mixed colouration of insecurity, border clashes, herdsmen-farmers clashes, banditry, kidnapping, and social unrest have all emerged as critical threats to our national life. And as we prepare for the general elections next year, we call on the Federal Government to ensure a free and fair exercise solely driven by sound electoral laws and governance”. Specifically, LCCI observes that the economic growth trend, measured by the Gross Domestic Product (GDP) performance, had generally been positive over the last two decades.
This is so except for recent challenges posed by debt crises, inflation risks, insecurity, and foreign exchange illiquidity, saying there it is imperative to address the weak government revenue base caused by oil theft and pipeline vandalism, rising and unsustainable debt profile, over-dependence on oil revenue, exposure to foreign shocks through inadequate forex supply and double-digit inflation. Besides, the growth of the telecommunications sector stands out as one of the most resilient sectors in the last year. Many sectors have leveraged telecom’s innovative possibilities to make significant progress through Information Communication Technologies, especially in the services sector, saying the country have tech-enabled platforms supporting healthcare delivery, agriculture, education and transport while calling on the government to commit to supporting the sector’s growth and strive to create an enabling regulatory environment. The DG disclosed further that the financial services sector had been significantly transformed since independence through leveraging technology to enhance service delivery, as the sophistication of the industry can compare with its counterparts even in advanced economies, but that the financial intermediation role of the banking system is still below expectation for it still has some weak linkages with many other sectors of the economy.
This weakness had constrained the sector’s impact on the economy from a systemic perspective while the “Quality of the business environment remains a concern to investors, especially in the real sector. Weak infrastructure, uncertain policy environment, and institutions have continued to adversely affect the efficiency, productivity, and competitiveness of many enterprises in the economy. These conditions pose a major risk to job creation and economic inclusion across sectors. The Gross Domestic Product (GDP) grew in 2022Q2 by 3.54% year-on-year in real terms, making it the seventh quarter of positive growth, as the oil sector had consistently recorded negative growth for the ninth consecutive quarter, contracting again by -11.8% y/y in Q2 2022 following a higher contraction of -26% y/y in Q1 for if oil revenue makes up more than 80 percent of government revenue”, Dr. Almona said.
LCCI enjoins the government to tackle the menace of oil theft and pipeline vandalism with sterner approach. The non-oil sector grew by 4.8% y/y in Q2 ’22 against 6.1% y/y in Q1 ’22. Key drivers within the non-oil economy include transportation and storage (51.7% y/y), finance and insurance (18.5% y/y), telecommunications (7.7% y/y), trade (4.5% y/y), real estate (4.4% y/y), construction (4.0% y/y), manufacturing (3% y/y), and agriculture (1.2% y/y). Combined, these sectors accounted for 78.3% of total GDP in Q2”. Furthermore, it calls on the government to continue with the non-oil campaigns and interventions to sustain the targeted financing towards boosting non-oil export for enhanced foreign exchange earnings. The growth of 1.2% recorded for agriculture and the 3% for manufacturing are comparatively low when compared with other sectors that grew at above 5% for this is also indicative of the threats facing these sectors that power Nigeria’s real sector.
“The woes in these two sectors are responsible for the frightening rise in our inflation rate. And with the excruciating burden from debt service, subsidy payments, and worsening insecurity, many more production activities may be constrained in the coming months. It advised the Federal Government to sustain its targeted interventions in selected critical sectors like agriculture, manufacturing, export infrastructure, tackling insecurity, and free up more money from subsidy payments”, as Dr. Almona appeals to 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. On power situation in the country, the chamber regrets that poor power supply had remained a major burden on businesses and this is one area since independence whereby there had been a progressive decline. In addition, power supply had consistently lagged behind the pace of economic activities and population growth, as this development had impacted negatively on investment over the past few years with increased expenditure on diesel and petrol by enterprises, which come with the consequences of declining productivity and competitiveness. With the frequent collapses recorded by the national grid, the country can no longer rely on a centralised power source and suggesting that the way to go is renewable energy and by decentralising the national grid.
LCCI is equally disturbed that the security situation in the country had deteriorated in the previous year by assuming a very worrisome dimension. This had impacted investment inflow and worsened the country’s perception and image by the global investing community. Access to markets in the troubled parts of the country had been reduced for many enterprises with negative consequences for investors’ confidence. Agricultural production bases have been negatively impacted, leading to food scarcity and rising food inflation. Over the last few decades, the challenges of production in the economy had grown progressively largely because of the quality of infrastructure, which is why the risk of industrial investment is high and continues to increase in the sense that the various policy interventions do not seem to have the desired impact on the sector. It cautions that unless there is effective and sustained protection and support for the sector, and a dramatic improvement in infrastructure, the outlook for the sector would remain gloomy because most Small and Medium Scale Enterprises (SMEs) are constrained by rising cost of production.
The body believes that it is impossible to have a vibrant manufacturing sector in the face of cheap imports into the country as well as high production and operating cost in the domestic economy for some of these imports are landing at 50% of the cost of products produced locally. It stresses that manufacturers would have to worry about high energy costs, high-interest rates at -25% and above, multitude of regulatory agencies making different demands on them, massive smuggling and under-invoicing of imports, and trade facilitation issues at the seaports and for most manufacturing SMEs, it is a nightmare for them even though, production is critical to enduring economic and social stability. In the final analysis, the chamber calls for the removal of “Fundamental constraints to manufacturing competitiveness in the Nigerian economy. In reality, job losses in the sector have increased over the decades as productivity declined on the back of the difficult operating environment. Our nation is at a cross-road and in dire need of big decisions to drive the drastic transformation the economy requires to return to economic prosperity”, Dr. Almona said.