In order to save the crumbling economy, the Lagos Chamber of Commerce and Industry (LCCI) has advised the Federal Government to find quick answers to the problems of Nigeria’s mounting debt, inflationary pressure, and escalating foreign exchange crisis.
This was said by the chamber’s president, Asiwaju Michael Olawale-Cole, in his remarks at the press conference for the chamber’s quarterly economic outlook, which was conducted on Tuesday in Lagos.
Olawale-Cole claimed that the forces of stagflation, deteriorating poverty, and recession had all increased due to a combination of factors including rising inflation, faltering growth, worsening interruption to supply chains due to the crisis in Ukraine, and the tenuous recovery from the Covid-19 lockdown.
He further noted that despite the 3.11 per cent GDP growth announced by the National Bureau of Statistics in the first quarter of 2022, the economy was still facing a wide range of issues that have exacerbated Nigerians’ standard of living.
He said, “Nigeria’s trade balance stood at a surplus of N1.2tn in the first quarter of 2022. To sustain this trade surplus, we need more investment in export infrastructure, enhanced and automated port operations, tackling high production costs, and boosting the supply-side of the forex market to improve liquidity and ease access to forex. We need to also diversify our exports by boosting our local refining capacity, production of petrochemical products, and accelerating reforms in the Oil & Gas sector to attract more foreign investments in the coming months.”
The chamber of commerce suggested a unification of the forex market in response to the escalating foreign exchange crisis that has caused significant issues for organized business; the World Bank Group President, David Malpass, had previously expressed a similar view during the IMF/World Bank Spring Meeting.
“The naira has recorded unprecedented volatility in the first quarter of 2022 with a widening premium between the official rate (at N415/USD) and the BDC/parallel market rate (of N615/USD). The chamber’s position is that monetary authorities need to liberalize the FX market by unifying the multiple FX rates and ensuring FX rates are market-driven.
“This is critical in the process of enhancing stability, liquidity, and transparency in the FX market. The unification is expected to improve our currency management framework given that the multiple exchange rate systems have continued to create uncertainties and sources of arbitrage.”
Olawale-Cole warned that should the Federal Government continue on its current course, debt servicing would inevitably consume virtually all of the government’s revenue, making it impossible for any reasonable progress to be made in the area of infrastructural development. She also discussed Nigeria’s alarming debt profile.
He added, “Nigeria’s debt-servicing bill has increased by 109 per cent from N429bn in 2021 Q4 to N896.56bn in Q1 2022. In Q1 2021, Nigeria spent N310.5bn on domestic debt servicing, while it spent $286.35m (N118.9bn) on external debt servicing, giving a total of N429.4bn. However, in Q1 2022, it was N668.69bn on domestic debt servicing, and $548.79m (N227.87bn) on external debt servicing, giving a total of N896.56bn.
“The borrowings are significantly increasing and Nigeria is struggling to service these debts due to revenue mobilisation challenges and an increased fuel subsidy burden.”