On state of the nation’s economy

The Lagos Chamber of Commerce and Industry (LCCI) has lauded the Nigerian President, President Bola Tinubu, on his second state of the nation address as the country battles with the short-term economic hardship resulting from subsidy removal and exchange rate harmonisation. The President of LCCI, By Asiwaju (Dr.) Michael Olawale-Cole disclosed that the presidential address showed leadership, responsibility, and accountability, and he demonstrated empathy as he unveiled a broad plan to ease the cost of living pains for Nigerians. He also provided clarity on the palliative measures and strategies for implementation. LCCI also commends the President on the palliative plan to support businesses, the working class, and the most vulnerable, as well as a policy intervention to check rising inflation and ensure exchange rate stability, saying the President covered most of the strategic sectors of the economy, but nothing was said about security, which is a critical factor in national development.

Olawale-Cole described the plan to spend the N500 billion (US$652 million) package to boost the economy by easing transportation costs, boosting manufacturing, and enhancing food supply and that, it would also provide conditional grants to at least a million small businesses. To ensure affordable food prices, it is good that strategic reserves of grains would be released to households, and support for agriculture, including farmland cultivation as a matter of priority. It maintains that these plans demonstrate that President Bola Tinubu is listening to Nigerians. The chamber supports the move to invest in the manufacturing sector. However, it states that would be pertinent to consider more enterprises as 75 enterprises would not significantly impact the economy.

However, “we commend the effort to kick-start sustainable economic growth and improve productivity. We believe that if this plan is rigorously pursued, economic growth through the real sector of the economy would be achieved and could revive Nigeria’s sluggish industrialisation and expand the Gross Domestic Product (GDP). We wish to call attention to the cost of funds. The plan is to offer loans to 75 scalable enterprises with enormous prospects at 9% per annum, repayable over a maximum period of 60 months. The government would need to closely monitor the banking sector in the provision of these loan facilities so that the eventual cost of funds is not above 9% from other banking fees and charges.

“It may be judicious to stipulate that the total costs of funds is benchmarked to 9% regardless of the charges and fees. The focus on improving public transportation, including providing buses to be fueled by compressed natural gas (CNG) for deployment in all the states, is a means to provide affordable transportation across Nigeria. This will help ease the problem of moving persons and goods across the nation. It will also reduce the cost of doing business which burdens most small enterprises. The Chamber hereby expresses concerns about the role of the State and Local governments as well as transparency in the implementation of the palliative strategies as the government plans to introduce an Infrastructure Support Fund for the states to invest in critical areas and revamp healthcare and educational infrastructure.

“We urge the government to ensure smooth and promising implementation of the measures and regularly engage the citizens and the organised private sector to ensure accountability. There should be proper monitoring and evaluation of the implementation process to ensure benefits to the people. We also wish to nudge the government to share in the sacrifice made by Nigerians by reducing the high cost of governance in all its tiers and ensuring fiscal leakages and corruption are strategically dealt with. As we commend the government’s courage in enacting a series of policies, we trust that government would be courageous enough to cut the cost of governance. This will demonstrate to Nigerians that the leaders share in the suffering and sacrifice of the people.

“The perks available to public office holders are so enormous that it is difficult for the average Nigerian to understand why they suffer so much and those in leadership are unaffected. We urge Mr. President to do the needful, and we expect further announcements on the measure to cut the cost of governance. Security has not been given sufficient attention. It is also of utmost importance to deal with the issue of insecurity because, without security, there can be no prosperity. If the issue of insecurity is not adequately dealt with, the implementation of these strategies could be in jeopardy. The issue of oil theft must not be sidelined at this stage, as it has critical implications for the rule of law and our economic well-being as a nation. This will demonstrate that there is a holistic effort to revamp the economy and chart a new path for Nigerians”, he added.

The LCCI further observed that the fuel subsidy regime is sometimes described as a scam due to the opacity and lack of integrity of the arrangement, and it had indeed become a burden on the economy and a source of enrichment for a select group of individuals. The chamber then calls on the government to make the required effort to identify and investigate the select group of individuals that allegedly plundered Nigeria’s national wealth and enriched themselves through the fuel subsidy regime, noting that they should be brought to book to prevent a recurrence of such criminal actions that had destroyed the nation’s economy and going forward, the system should also have sufficient transparency, accountability, and integrity, particularly with product pricing.

“We urge Nigerians to exercise some patience, as emphasised by the President. The degradation of our economy has occurred over several decades and it cannot be reversed within a few short months. It would take a concerted effort by all and focus on the strategic alignment of our national goals for change to occur. In reality, it is inevitable that we suffer some pain for these reforms to be successfully implemented. We all want a better and brighter future for Nigeria, so let us work together to make it happen”, the body said.

The LCCI is, particularly concerned by the call to arm by the Nigeria Labour Congress (NLC) and Trade Union Congress (TUC) via ‘peaceful’ protests. The chamber noted that it is reasonably worried that the ‘peaceful’ protests being experienced as a result of the fuel subsidy removal may be taken advantage of by hoodlums and they may inadvertently invert the effort of the government to alleviate the sufferings of the masses. The chamber acknowledges that peaceful protests across democratic countries are a right of the citizens, as the organised labour is not excluded. It is, however, concerned about their detrimental impacts and implications for the organised private sector and the overall economy.

The chamber agreed that the protests were coming at a time when all hands are supposed to be on deck, given our recent experiences as a nation and the current realities of our economy, with prices of staples, transportation, and others constantly on the rise. While admitting that the removal of subsidy was having significant economic and social impacts on the citizenry, the chamber believes that the government should be given more time to address the emerging sundry issues as a result of the subsidy removal. While calling for calm, the chamber urges all parties concerned to embrace dialogue as both sides have expressed valid arguments and slants on their positions because it is by constructive engagement that issues and concerns of this grave nature can be amicably resolved for the overall health of the economy.

Meanwhile, the LCCI has drawn attention to the Central Bank of Nigeria’s Monetary Policy Committee (MPC), which raised its benchmark interest rate by 25 basis points to 18.75% from 18.50%, the highest rate since MPR was adopted in 2006. It, however, narrowed the asymmetric corridor to +100/-300 basis points from +100.-700 basis points around the policy rate. Cash Reserve Ratio (CRR) and Liquidity Ratio (LR) are held steady at 32.5% and 30%, accordingly, saying this is the fourth consecutive rate hike so far this year and the eighth consecutive rate hike since April 2022.

According to the chamber, between January and June 2023, the headline inflation rate accelerated for the sixth consecutive month to 22.79% and is expected to rise further due to subsidy removal, exchange rate harmonisation, and the anticipated impact of the palliative distribution in the near term, saying the option to continue to hike the policy rate came amid a slight downgrade of the country’s growth projection to 2.8% by the World Bank. The group advised the CBN to moderate the key rate given the weak relationship between it and inflation, especially after manufacturers and other businesses are groaning under high operating costs, low growth, and more especially in the face of high unemployment. Furthermore, monetary policy alone appears insufficient to guarantee the desired results of low, stable, and predictable prices, the LCCI stated further.