…advises authorities on path to economic recovery
Lagos Chamber of Commerce and Industry (LCCI) has forecast that Nigeria’s Gross Domestic Product (GDP) will further slide to -2 per cent in Q4 2020 with no sign of recovery by year end. Also, the LCCI insisted that the second wave of COVID- 19, crashing oil price and production, persistent pressure on forex, deteriorating purchasing power coupled with the disruptive impact of #EndSARS protests would most likely dampen recovery prospects.
Nigeria’s economy is currently in recession. Disclosing these during the LCCI’s 2020 Annual General Meeting (AGM) in Lagos yesterday, the President of the chamber, Mrs. Toki Mabogunje, also said that the current recession in the economy was a major risk to recovery.
Although the LCCI president explained that lockdown restrictions had been lifted completely in the country, she said economic and business activities were somewhat weak, reflecting November 2020 PMI readings, noting that robust growth would be elusive despite festive-related spending in the Q4.
Mabogunje said that what the country’s economy needed to stage a come-back to recovery is to achieve faster recovery on fiscal and monetary sides of the economy to promote growth enhancing and confidence building policies that will encourage private capital flows to the economy.
She said: “We believe the economy will end the current year 2020 in a negative growth territory within the region of minus two and minus one per cent. Achieving faster recovery requires the fiscal and monetary sides of the economy to promote growth enhancing and confidence building policies that will encourage private capital flows to the economy.
“It is imperative for fiscal and monetary authorities to develop a medium-term recovery plan anchored on boosting local productivity, supporting ease of doing business, attracting private investment, developing physical and soft infrastructure, business-friendly regulatory policies, economic diversification and employment generation among others.” Speaking further on the country’s real GDP growth, which contracted by 3.62 per cent in the third quarter, marking the second consecutive decline in national output after a 6.1 per cent contraction in the Q2, the LCCI president stated that this confirmed that the Nigerian economy was in a recession. According to her, the moderation in the magnitude of the contraction is due to the lifting of global and domestic lockdown measures, which consequently supported the gradual reopening of the economy. “With two consecutive quarterly contractions, it means the Nigerian economy is currently in a technical recession, the second economic recession since the 2014 commodity price shock.
“More importantly, the contraction reported in the third quarter was largely driven by significantly lower crude production in the third quarter coupled with the lingering effects of the global pandemic.
“In the third quarter, the Nigerian economy experienced several challenges, including subdued business and commercial activities across various sectors (evident in PMI data trend), lower prices and production, FX pressures (evidenced by the widening premium between official and parallel FX rate) revenue pressure from oil and non-oil sources, rising external imbalances, inflationary pressure, weaker purchasing power, weak employment levels and poor investor confidence,” she said.
The industrialist pointed out that performance across sectors was largely weak, stating that the chamber’s analysis showed 27 sectors were in recession, two sectors contracted, four reported moderation in growth while 13 sectors expanded in the third quarter. “The oil sector contracted sharply by 13.89 per cent as against -6.63 per cent in the preceding quarter. The weak performance could be attributed to reduced crude production following Nigeria’s compliance to OPEC+’s production reduction agreement aimed at rebalancing the global energy market. “Nigeria was compelled to make compensatory cuts in August and September as a punitive measure for exceeding production targets in June and July. “As a result, average daily crude production in the third quarter dipped slightly to 1.67 million barrels, the lowest since Q4 2016. “Additionally, the recent rebound in global oil market failed to gain momentum as prices were range bound between $40 and $45/bbl given the sluggish recovery in global crude consumption as industrial activities in Europe and Asia are still below pre-pandemic level. “The non-oil sector reported a less severe contraction of 2.51 per cent in the third quarter compared with 6.05 per cent in the preceding quarter following easing of lockdown restrictions. “Though lockdown restrictions were significantly eased in the third quarter, however, some sectors including aviation, hospitality and education were under lockdown in most of the third quarter, even as activities remained subdued in sectors where lockdown measures were eased,” Mabogunje noted.