The Nigerian economy has been driven by growth in the non-oil sector in first quarter. This piece of information was given in the communique on the 2023 Mid-Year Economic Review and Outlook, jointly organised by the Lagos Chamber of Commerce and Industry (LCCI) and Cordros Capital, to point out opportunities for business growth and sustainability in Nigeria and the global market.
In a statement signed by the Director-General of LCCI, Dr. Chinyere Almona, the chamber’s President, Asiwaju (Dr.) Michael Olawale-Cole, was quoted as saying that the half-yearly event reviewed vital policy developments and macroeconomic performance. It also discussed the outlook and expectations for the next half, focusing on risks and opportunities, saying the Nigerian economy in the first half of 2023 was quite challenging due to multiple factors. Although, the general elections held in March 2023 were considered relatively peaceful and the transition completed in May, business conditions and operating environment in the first half of the year were essentially difficult due to rising interest rates, inflationary pressures, foreign exchange volatility, and the liberalisation of the downstream sector of the oil and gas industry.
The LCCI revealed that as a result, the cost of living had significantly gone up for the first quarter, Gross Domestic Product (GDP), which slowed to 2.31%, primarily driven by growth in the non-oil sector while the oil sector remained in recession. The country also witnessed a significant decline in Foreign Direct Investments (FDIs), coupled with a high level of public debt stock and concerns for debt sustainability, high unemployment, and poverty levels. The International Monetary Fund (IMF), in its July 2023 World Economic Outlook (WEO) Update, lowered its growth projection for Nigeria in 2023 to 3.2% from 3.3% in 2022, reflecting security issues in the oil sector, policy risks, and persistently high inflation.
To address long-standing macroeconomic imbalances and change the economy’s trajectory, the new government, led by President Bola Tinubu, introduced several reform policies, including fuel subsidy removal, and foreign exchange unification. Furthermore, several palliative measures had been introduced to ease the effect on businesses, low-income people, and the most vulnerable. The consensus of stakeholders at the 2023 Mid-Year Economic Review and Outlook recommended that the government should consider the urgent need for an all-encompassing economic and fiscal plan, full/partial divestment of state-owned real estate, improved transport sector, and energy assets, as post-election priorities; and that the government must focus more on asset-based and equity offerings, to improve revenue.
Additionally, the chamber stated that institutional reorganisation is urgently needed in the Central Bank of Nigeria (CBN) and the Nigerian National Petroleum Corporation (NNPC), to improve transparency and accountability while the operating environment of the Nigerian National Petroleum Corporation Limited (NNPCL) is somewhat opaque, which is anti-competition, as the oil sector would attract the desired investment, if the government liberalises fuel import licenses and other vital activities in the midstream and downstream. The government should unlock revenue from assets by complementing tax with rent, fees, dividends, and capital gains while economies that optimise revenue, through equities, had recently offset the loss from declining commodity prices.
The body advised the new administration to borrow better to reduce debt costs by issuing a more asset-linked debt than ‘I owe yous’. The non-interest-bearing debt opportunities should be explored as emerging markets tilt towards project equity financing while Bureau De Change operators should not be referred to as parallel or unofficial markets, because they are officially-licensed to trade, informing that the LCCI, over the last 135 years, had consistently engaged the government and advanced the growth of the private sector and the overall Nigerian economy, through regular reviews of the business and economic climate and policy advocacy, the statement added.
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