LCCI releases 2019 Economic Review, outlook for 2020

The Lagos Chamber of Commerce and Industry (LCCI) has projected a high cost of doing business in 2020.

Its Director-General, Dr Muda Yusuf, made the projection in the LCCI 2019 Economic Review and Outlook For 2020 made available to newsmen on Thursday in Lagos.

He attributed the projected high cost to poor infrastructure, multiplicity of levies, excessive regulations, among others.

Yusuf said that while the nation may have recorded improvement on the Ease of Doing Business Ranking due to some recent policy measures, realities on ground would continue to differ if the highlighted challenges were not properly addressed. He said that the performance of the trade sector in 2020 would be shaped by the direction of government policies.

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.

The director general said that headline inflation was expected to trend higher in 2020. He said this would be driven by implementation of new minimum wage and continued closure of the land border.

Yusuf said that higher Value Added Tax rate of 7.5 per cent and the early disbursement of funds for budget implementation following the return of the budget cycle would also be contributory factors.

“We expect economic growth to remain subdued at around 2 per cent by 2020 as consumer demand, as well as private sector investment, will most likely remain weak.

“We are of the view that failure by government to fix structural constraints with regards to fixing power challenges and rehabilitating deplorable road networks, will perpetuate the poor productivity and performance of the sector.

“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 trade sector.

“As a sustainable solution, it is imperative to fix the fundamental issues of high cost of domestic production, the prohibitive cost of cargo clearing at the Lagos ports, prohibitive import tariffs, high cost of logistics within the economy, and border policy capacity,” he said.

On the performance of the agricultural sector, the Director-General projected improved credit flow to agriculture on the back of proposed increase in deposit money banks’ loan to deposit ratio to 70 per cent. However, from 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 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, resurgence in 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 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, however, expressed the hope that steps to curtail security risks would be taken before implementation.

“We hope the necessary government agencies would take steps required so as not to expose the country to security risks and properly scrutinise those that would be coming into the country through the visa-on-arrival facility.” he said.

He proposed the adoption of Visa Free Policy for nationals of selected advanced economies to facilitate the inflow of investment from such countries to Nigeria.

To unlock the potential of the Nigerian economy, Yusuf proposed the promotion of economic inclusion through a right mix of fiscal, monetary and investment policies, regulations and institutions.

“The potentials for 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.

“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.

“It is 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 policy makers and the private sector,” he said.

With regards to budget passage, the finance bill and their implementation, the LCCI chief urged government to create a monitoring mechanism to ensure compliance.

He said the government should also release progress reports about the budget performance quarterly.

“While the early passage of the budget is commendable, our concern is about the implementation following Nigeria’s poor budget performance in years past.

“In furtherance, 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,” he said. Yusuf also expressed the LCCI’s fears on the fiscal transparency policy.

“We fear that MDAs may not fully comply with this new move and may find new ways to ensure that the policy does not yield expected results.

“We are also of the opinion that the President forwards an executive bill to the National Assembly to make this policy a law as this would ensure that this policy becomes entrenched in the laws of the land and does not fade away after the tenure of the present administration”.