Following the decline of the nation’s Gross Domestic Product (GDP) by 6.10 per cent (year-on-year) in Q2’20, the Lagos Chamber of Commerce and Industry (LCCI) has expressed concern over impending challenges just as it attributes the negatives to the COVID-19 outbreak.
The GDP report ends the three-year trend of low, but positive real growth rates recorded since the 2016/17 recession. In addition, the LCCI pointed out that the economy was in dire straits, and urgently needs reflating as it is critically important to tackle the twin challenges of rising inflation and unemployment.
Reacting to the National Bureau of Statistics (NBS’) report which showed that the country’s economy contracted by a record 6.1 per cent in the quarter under review, the Director- General of LCCI, Dr. Muda Yusuf, explained that GDP report marked the steepest quarterly contraction in Nigeria’s recent economic history.
Yusuf noted that the 6.1 per cent contraction was not a surprise to the members of the organised private sector as the number reflects the profound impact of COVID- 19 on the economy.
He added that the containment measures, including lockdown, curfew, interstate travel bans, closure of schools, airlines, businesses imposed globally and domestically to slow the spread of the pandemic, significantly disrupted global supply chains and destabilised commercial, business, investment, and trade activities.
In addition to these, it was also in the second quar ter that the country was confronted with weakening oil prices, low crude production, huge volume of unsold crude cargoes, foreign exchange scarcity, depleting external reserves, portfolio outflows in the financial markets, disruption and adjustment of the 2020 budget, revenue collapse from oil and non-oil sources, rising spate of job losses, high food prices, among others.
Yusuf described the report as a low for the government of President Muhammadu Buhari, who had vowed to turn around the economy. Speaking on the sectoral performance in Q2 2020, the LCCI director-general said there was weak performance of the economy at sectoral level, particularly among critical sectors with potential to facilitate diversification.
He said: “We note the weak performance of the economy at sectoral level, particularly among critical sectors with potential to facilitate economic diversification. “While some sectors did expand in the second quarter, most of the sectors that reported positive growth in the first quarter plunged into sharp contraction while others maintained their position in recessionary territory.
“In all, 46 sectors, 19 contracted; 14 are in recession, 11 sectors expanded, and two sectors reported slowdown in growth.” While speaking further on the country’s agric sector performance, he said: “Agriculture grew at a slower pace in Q2 2020. The sector expanded by 1.58 per cent in Q2 2020 compared with 2.2 per cent in Q1-2020.
“Crop production, which accounts for over 85 per cent of agricultural output, recorded moderation in growth from 2.38 per cent in Q1 2020 to 1.44 per cent in Q2 2020.
The slowdown was driven by disruption to the food supply chains, difficulties experienced by farmers in conveying their products inter-state and insecurity in food producing areas.”
For manufacturing, the LCCI DG said: “We note with concerns that the manufacturing sector has been struggling with growth before the outbreak of the novel coronavirus, despite being one of the biggest beneficiaries of CBN’s loan-todeposit policy.
“Manufacturing sector contracted by 8.78 per cent in Q2 2020 compared with a marginal 0.43 per cent growth in the previous sector. We note that of the 13 sub-sectors in the manufacturing space, only two sectors – chemical and pharmaceutical products and motor vehicles and assembly reported positive growths, while the other 11 sub-sectors had negative growth.
“In our view, we believe the weakness of manufacturing sector was due to global and domestic supply chain disruptions, foreign exchange illiquidity, weak consumer spending and high operating costs.”
Shedding more light, Yusuf stated that the country’s real estate had been stagnant in terms of performance. “We note that performance of the real estate sector has been weak before the pandemic.
“The sector contracted by 21.99 per cent in Q2 2020. We note that lockdown and social distancing rules made it difficult for real estate players to interact and transact with clients, and this led to suspension of most real estate projects.”