A new survey of the Lagos Chamber of Commerce and Industry (LCCI) has revealed that COVID-19 and EndSARS protests resulted to the country’s volume of business activities contracting in December 2020 with Purchasing Managers’ Index (PMI) for manufacturing and non-manufacturing sliding down to 49.6 points and 45.7 points respectively. The new LCCI survey, which was cited by New Telegraph, showed that PMI for manufacturing and non-manufacturing declined to 49.6 points and 45.7 points respectively in December 2020, from 50.2 points and 46.8 points in the preceding month. The Purchasing Managers’ Index is an index of the prevailing direction of economic trends in the manufacturing and service sectors. It consists of a diffusion index that summarizes whether market conditions, as viewed by purchasing managers, are expanding, staying the same, or contracting. More importantly, in the LCCI report is the employment PMI, an indication of job creation and labour productivity have been in the contractionary territory since March 2020.
However, the report further stated that business activities were yet to return to pre-pandemic level even after lifting of lockdown measures by federal and state governments as businesses are yet to recover from the COVIDinduced shock. The report pointed out that business activities in 2021 were not very bright as there are no quick fixes for the structural issues and the desired regulatory and institutional reforms despite exiting recession in the Q4’20. In particular, the chamber explained in the report that the business community witnessed two major disruptions in year 2020 – COVID-19 and EndSARS protests – as the pandemic, through its various containment measures, disrupted business environment, businesses and commercial activities nationwide.
In addition, the sharp naira exchange rate depreciation, coupled with sustained acceleration in domestic prices, escalated the cost of production as well as operating costs for investors in the economy even as revenue was pressured by unfavourable economic conditions. LCCI alluded in the report that the major challenges faced by the business community in year 2020. More importantly, employment PMI, an indication of job creation and labour productivity have been in the contractionary territory since March 2020 include foreign exchange devaluation, high energy & production cost, port congestion and cumbersome customs processes, insecurity, inconsistent government policies, regulatory uncertainties, land border closure, Apapa gridlock and weak consumer demand. In order to retool the country’s fragile economy, the Chamber said in the report that the security situation as well required new strategies and approaches, adding that it was not clear what new strategies are in the works.
But it emphasised that without bold policy pronouncements in this regard, constraints to the ease of doing business, including FX shortage, escalating production costs, high regulatory costs, infrastructure inadequacies and delayed cargo clearance, would persist in the year 2021. Particularly, these constraints will be more profound on businesses in the real economy. The report said: “Although lockdown have been eased completely, economic and business activities remain weak reflective in PMI Readings. While GDP growth is usually robust in Q4’20 due to festiverelated spending, year 2021 will likely be an exception as we expect rising pressure on consumer incomes and lingering FX pressure to dampen recovery prospects in Q1’21. “Additionally, resurgence in COVID-19 pandemic coupled with relatively lower oil production and price as well as the disruptive impact of the EndSARS protest are the major downside risks to the non-oil sector.”