The Lagos Chamber of Commerce and Industry (LCCI) says President Tinubu’s first year in office has been characterized by accelerating inflation, rising public debt, FX market instability and interest rate hikes that have weakened the performance of the manufacturing, agricultural and telecoms sectors.
The chamber said the economy has been in an adjustment mode with several variables like stubborn inflation, persistent weakening of the country’s currency, supply chain disruption driven by insecurity, and weak production base, defining the outlook at any given time.
Chinyere Almona, the director general at LCCI made this known in a statement in which she gave an evaluation of the administration’s stewardship to Nigerians in the last 12 months.
The chamber pointed out that some bold decisions were taken at some point with sincere intentions of fixing structural deficiencies; such as removing fuel subsidies, harmonising official and parallel exchange rates, and adopting a cost-reflective electricity tariff, among others.
However, it said that there is now a need for a systematic review and evaluation of these policies to achieve the best-desired outcomes.
Gross domestic product
Looking at the gross domestic product (GDP), the leading economic performance indicator, LCCI compared what was recorded in the first quarter of 2024 (2.98 percent) and 2.31 percent in the corresponding period of 2023.
And concludes that ordinarily the country would have achieved its target of 3.37 percent, but for issues around power supply, rising cost of production, and forex illiquidity, among others.
LCCI explained that those shortfalls of the government are having an undue impact on imported raw materials for manufacturers, making better choices of monetary instruments, and dealing with the security challenges that hitherto have impeded agricultural production and supply chain disruptions.
Acceleration inflation
LCCI disclosed that the government’s fight against inflation has not been successful, as the prices of goods keep an upward trend, with the inflation rate rising from 22.22 percent in April 2023 to 33.69 percent in April 2024, recording more than a 10 percent leap in twelve months.
“In attempts to curb flaring inflation, the Central Bank of Nigeria, through the instrument of rate hikes, has consistently increased the benchmark rate, the Monetary Policy Rate (MPR), within the last twelve months.
“This action has made borrowing costlier and constrained new credit for productive activities. This has continued to weaken our production base and impede new job creation in the economy,” the statement read in part.
Fiscal policy and government finance
LCCI observed that the government’s spending was largely sub-optimal due to substantial debt services and returning subsidy payments.
Thus, removing subsidies was to reduce the enormous fiscal burden on the government and improve its financial well-being.
The President, the chamber said, signed a budget of N28.7 trillion in 2024 tagged “Budget of Renewed Hope”, comprising N1.74 trillion for statutory transfers, N8.27 trillion for debt servicing, non-debt recurrent expenditure of N8.76 trillion, and Capital expenditure of N9.99 trillion.
Nigeria’s debt stock was N97.34 trillion ($108.22 billion) at the end of 2023, compared to N87.38 trillion ($113.42 billion) at the end of June 2023.
This, LCCI disclosed, represents an increase of about N10 trillion. The total public debt stock increase is reflected in domestic and external debt.
“Between May 2023 and April 2024, the Federation Account Allocation Committee (FAAC) disbursement increased by 93.1percent to N1.87 trillion from N976.3 billion. However, April declined slightly compared to FAAC disbursed in March at N2.33 trillion.
“The Tinubu administration has made strides in fiscal consolidation, reducing the budget deficit to 4.5 percent of GDP from 5.7 percent the previous year. Public debt levels remain high at 34 percent of GDP, though manageable within the current fiscal framework,” they said.
Manufacturing sector
The manufacturing sector, the chamber revealed, has shown resilience and growth amidst recent reforms and interventions aimed at fostering economic development and industrialisation.
LCCI maintained, however, that the sector experienced fluctuations in growth rates throughout the quarters of 2023 and the first quarter of 2024, reflecting both challenges and opportunities.
Analysing the performance of the sector, they said; “The first quarter of 2024 presented some challenges, with nominal GDP growth slowing to 8.21percent year-on-year.
“Quarter-on-quarter growth was negative at -17.67 percent, reflecting a contraction. Despite this, the sector’s contribution to Nominal GDP remained substantial at 14.79 percent.”
Agricultural sector
LCCI explained that the agriculture sector was impacted mainly by insecurity, fuel subsidy removal, and consistent exchange rate depreciation, which increased the cost of fertilizer and other input costs.
And that as a result of the challenging conditions, the federal government declared a state of emergency on food production to stabilise prices, it said.
It implemented several intervention policies, including distributing N100 billion fertilizers to boost food production.
However, affordable food is still a far cry. According to NBS, food inflation has consistently increased over the last twelve years, reaching 40.53 percent in April 2024 compared to 24.82 percent in May 2023.
In terms of GDP, agriculture sector growth has mainly been sub-optimal. In the first quarter of 2024, the sector grew by 0.18 percent compared to 2.10 percent and 1.30 percent in Q4 and Q3 of 2023, respectively. This implies a downward trend in the sector’s output.
ICT sector
According to LCCI, “The growth of the ICT sector since the second quarter of 2023 has been on a downward trend, reflecting several challenges facing the sector, such as exposures to exchange rate depreciation, poor electricity and high cost of fuel, high interest rates, and government policies.”
The chamber, therefore recommends that the government should strengthen the monetary policy by enhancing coordination between fiscal and monetary policies to better control inflation.
Besides, the government should continue with tax reforms and improve compliance to increase revenue. And also take steps to diversify the economy by investing in non-oil sectors to reduce dependency on oil revenues and build economic resilience, among others.
