Says rising indebtedness calls for concern
The Lagos Chamber of Commerce and Industry (LCCI) has projected that the country’s debt profile will rend upwards by 2020.
Director-General of LCCI, Dr Muda Yusuf, made the projection in the LCCI 2019 Economic Review and Outlook For 2020 made available to newsmen in Lagos.According to him, we expect the country’s debt profile to trend upwards by 2020 on approval of $3 billion credit facility from World Bank for power sector reforms; Possible ratification of $29.96 billion loan request for infrastructural development; wider fiscal deficit (2020: N2.7trn; 2019:N 2.1trn) and increased appetite for government securities by institutional investors following their exclusion from open market operation (OMO).”The rising indebtedness of the economy calls for concern as increased debt stock failed to stimulate neither growth nor infrastructural development. Given Nigeria’s revenue challenges, the country will continue to spend a large chunk of its earnings to service debt.”
Yusuf anticipated that the manufacturing sector would continue to benefit from the Central Bank of Nigeria’s aggressive credit push. He, however, predicted that competition between foreign and local producers would fade on prolonged closure of land borders.
“In furtherance, we see the scope that competition between foreign and local producers will fade on prolonged closure of land borders. Also, the early budget implementation for capital projects is positive for the sector. We are of the view that failure by the government to fix structural constraints with regards to fixing power challenges and rehabilitating the deplorable road networks will perpetuate the poor productivity and performance of the sector.”
“Performance of the trade sector in 2020 will be shaped by the direction of government policies. In our opinion, continued protectionist measures of government will most likely limit growth in 2020. Elsewhere, the level of the country’s engagement in Africa Continental Free Trade Area (AfCFTA) scheduled to kick-off July 1, 2020, will also impact the performance of the trade sector.”
He further explained, “We see a high cost of doing business in Nigeria, infrastructural challenges such as erratic power supply, congestions at ports, inefficient road and railway system combined with the multiplicity of levies, inconsistency in government policies and excessive regulations as constraints that may continue to hinder ease of doing business in 2020.”
“While Nigeria may record improvement on the Ease of Doing Business Ranking, as a result of some recent policy measures, realities on the ground will continue to differ if the challenges highlighted are not properly addressed. ”
“We believe the government will maintain its protectionist economic policies in 2020. While protectionist policies might help local industries stay afloat albeit it makes them remain less competitive to their foreign counterparts. It is probable that the government will leave the land borders shut until it gets the desired level of commitment from neighbouring countries.
“The economy will continue to feel the heat of the policy action in 2020 in terms of higher food prices due to supply shortages. We reiterate our position that effective border policing, not shutting the borders, is a better approach to curtail smuggling. In furtherance, we see the Central Bank of Nigeria maintaining status quo in 2020 by restricting forex supply to the 43 items on the exclusion list. While the policy has benefited some investors, it has penalised others.”
On the performance of the agricultural sector, the Director-General projected improved credit flow to agriculture on the back of the proposed increase in deposit money banks’ loan to deposit ratio to 70 per cent.
However, from a policy perspective, Yusuf expressed the view that prolonging closure of the land borders would further add impetus to agricultural output in 2020.
“The monetary value of agriculture output has been on the upward trajectory, rising 40 per cent quarter-on-quarter to N5.41 trillion between July and September from N3.86 trillion between April and June, compared with N3.60 trillion in the first quarter.
“The CBN like it did in 2019, will maintain the status quo by not relenting in supporting the sector with much-needed funds in ensuring that the wide gap between local demand for food and supply is bridged.
“However, risk factors to our prognosis include security challenges in the North-east zone; a major food-producing region in the country, a resurgence in a herders-farmers clash in the North-central region.
“Overall, we expect the sector to sustain its upward growth trajectory in 2020,” he stated.
In addressing the Visa-on-arrival policy, the DG expressed the belief that the policy would ensure continental economic integration between Nigeria and other African nations, particularly with regards to the Africa Continental Free Trade Area scheduled to start on July 1, 2020.
He urged the government to create a monitoring mechanism to ensure compliance.
“We also, want the government to release progress reports about the budget performance every quarter.
“We believe the implementation of the finance bill will ease the tax burden of small businesses but will probably not translate to improved performance as the operating environment is still tough.
“The potentials for the growth of the Nigerian economy is immense. But we should not remain a nation of potentials. In order to unlock these huge potentials, we need to put in place appropriate policies, regulations and institutions. Some of these have been highlighted in this outlook.
“Investment is critical to the growth of any economy. This is even more so in an economy that is struggling with revenue and other resources. Growth in private investment will boost employment, impact on revenue, promote social stability and enhance the welfare of citizens.
“Even more important is the promotion of economic inclusion through the right mix of fiscal, monetary and investment policies. It thus very fundamental that we create an enabling environment for investors [domestic and foreign] to create wealth and jobs for the country. There is also a need to deepen the consultative process between the policymakers and the private sector,” he said