The Lagos Chamber of Commerce and Industry (LCCI) has projected a hard landing for the economy in the year.
It said this would be caused by mounting uncertainties, persistent high inflation and aggressive global monetary policy tightening.
In a statement made available to The Nation, LCCI Director- General, Dr Chinyere Almona, said the continued disruptions by the Russia-Ukraine war, energy crisis, weak consumer demand and political upheavals were factors that would affect the ecomony.
She said with several shocks suffered by many economies and over a greater portion of last year, various projections and analyses of economic conditions across regional blocs point to the likelihood of a recession or a significant slowdown of growth in 2023.
The LCCI boss said this would be a result of spiralling inflation, high energy cost, monetary policy tightening, and weakening consumer demand. Global growth, though positive, slowed by about 50 per cent between 2019 and last year, she added.
Looking further into the year, she said the war in Ukraine and mounting sanctions on Russia might continue to impact supply chains for commodities and shocks to financial systems across the world.
The likely failings of the G7 countries’ agreement on Russian oil price cap, resurgence of COVID-19 infections and likely return of restrictions, and renewed tensions in the Middle East might continue to keep oil price upward and volatile in the short term. Oil prices rose by 44.87 per cent in 2022, the highest in five years.
On the domestic economy she stated that for Nigeria, the base factors that may continue to drive the major economic indicators are the rising inflation rate, tight monetary policies, an unstable currency, foreign exchange scarcity, debt burden, currency management, food supply disruptions, exchange rate volatility, and election spending.
Furthermore, she said the CBN response to the spiralling inflation rate, deployed a tightening monetary policy to stabilize prices. The rates rose from 11.5 per cent in January and peaked at 16.5 per cent as at November 2022.
She argued that it is expected to rise further during the MPC meeting in January to 17 per cent to curb the persistent inflation and prevent capital flight. “
“The Chamber had earlier recommended that rate hikes alone would not curb inflation except the real factors like food supply disruptions, high energy cost, scarcity of FOREX, and the security challenges around agricultural production locations that have fuelled low production and high logistics cost will continue “.
She canvassed the need for fiscal interventions in 2023 to support strategic sectors like manufacturing, agriculture, transport logistics, and more allocation of FOREX to productive sectors.
On the nation’s economic growth, she responded that the economy
in 2022 recorded growth in the first three quarters but slowed down from 3.54 per cent in Q2 to 2.25 per cent in Q3. However, we expect to have a growth reported for the last quarter of 2022. The slowdown was driven by decline in aggregate demand in the face of inflation spikes, commodities’ supply chain disruption, high energy cost, and FOREX scarcity. In 2023, we expect to see growth in sectors like manufacturing, agriculture, transport, telecommunications, and trade she added. Speaking about the Telecom sector she stated that with Nigeria having the third largest subscriber base in Africa (after South Africa and Egypt), the telecoms sub-sector is expected to record growth above the 10.1per cent achieved in Q3 2022 driven by the growing deployment of Payment Service Banks (PSB) by the telcos, increase in subscribers using more telcos’ services, and the expected innovation coming with the launch of the 5G technology. She urged the government on the need to be more sensitive to the regulation of the ICT sector to promote growth and support private sector operations.
On the agriculture sector she lamented that the sector
witnessed quite a lot of challenges ranging from insecurity, poor road network to connect markets, high cost of farm inputs to recently, the flooding disaster caused by climate change.
According to her despite these challenges, the sector recorded growth all through the year 2022. In 2023, government’s intervention through targeted financing support to this sector can boost agricultural production, create jobs, and lower the spiking food inflation that has been responsible mainly for the rising headline inflation all through 2022 she added.
“The African Continental Free Trade Agreement (AfCFTA) provides huge opportunity to explore the African markets with our agricultural products. We urge the Federal Government to scale up plans of establishing special economic zones where agro-processing activities are supported to produce finished food products for our markets and for export”.
She stressed that when some of these challenges are resolved, the nation will expectedly see a higher growth rate at above 3 per cent higher than the less than average 2 per cent recorded in 2022. She reiterated the Chambers call that government at all levels should invest more on prevention of climate change induced natural disasters like flooding.
Dr Almona also stated that the manufacturing sector suffered from headwinds like scarcity of FOREX for import of inputs, weakened consumer demand due to weak purchasing power, high energy cost, logistical challenges, policy uncertainties, and harsh regulatory environment.
According to her with these factors persisting into 2023, we may likely record a growth in the sector away from the negative growth of -1.9 per cent as at Q3 of 2022 and with lowering imports due to forex scarcity, local manufacturing could rev up in growth to meet the growing unmet local demand for hitherto imported finished products. She said this can only happen if we address issues like rising inflation, scarcity of FOREX, high energy cost, high interest rates, and logistics challenge due to insecurity in most parts of the country.
On subsidy removal by the new administration, she stated that it would lead to some shocks to the economy in the short term with possibility of adjusted pricing and demand in response to market forces in the long run.
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