Slow Economic Growth Worries LCCI
GILBERT EKUGBE
The Lagos Chamber of Commerce and Industry (LCCI) has expressed concerns over the slow pace of economic growth being experienced by the country, noting that development is not broad-based across sectors.
The president, LCCI, Toki Mabobunje, at a press briefing on the state of the economy, noted that although the domestic economy sustained a significant recovery albeit growth remains fragile.
Quoting the National Bureau of Statistics, she said the economy grew at an average of 2.17 percent between January and September 2019, which is below the population growth rate of about 3 percent.
“We also observe that In the third quarter of 2019, 10 sectors expanded; six contracted and three recorded moderation in growth. We believe the economy is not growing fast enough to create opportunities for the citizens. The economy is still vulnerable to external shocks notably fluctuations in global oil prices,” she added.
In her words,”This partly explains why two global credit agencies – Moody and Fitch, recently downgraded our economic outlook from stable to negative on the back of slow fiscal growth and increasing vulnerability to exogenous shocks. We, therefore, urge the government, as a matter of urgency to intensify diversification efforts and embrace structural reforms to attract private investment in stimulating economic growth.”
On the rising inflation, she said has a profound welfare effect on citizens as it weakens purchasing power, pointing out that heightened food inflation naturally escalates poverty conditions as food is basic to human existence.
“Intense inflationary pressures also have a negative impact on investment as the cost of production and business operations increases. This typically takes a toll on profit margins as sales and turnover declines. We believe government can stem rising consumer prices through increased investment in infrastructure especially power and transportation,” she added.
She said the mono-product nature of the economy continues to expose the nation to volatility in the global oil market with its attendant consequences on the economy, urging the government to intensify its diversification efforts.
“This is very crucial for the economy to benefit from the African Continental Free Trade Agreement (AfCFTA) scheduled to start on July 1st, 2020,” she noted.
The LCCI boss added that private investment inflows to Nigeria stood at $19.7 billion from the first to the third quarter in 2019, stressing that the domination of portfolio investment in total capital importation combined with a sustained decline in foreign direct investment highlights the fact that the economy is considered risky by foreign investors.
He advised the government to do a lot more to ensure policy reforms that could attract private investment into the economy.
“We believe that it would be almost impossible for the government to accelerate growth, create job opportunities and alleviate poverty without adequate private investment in the real economy. Promoting foreign direct investment (FDI) and domestic investment requires impactful investment in infrastructure, policy consistency and stable macroeconomic environment. We should prioritize foreign direct investment (FDI) over foreign portfolio investment (FPI),” she advised.
On the Value Added Tax (VAT) increase, Mabobunje said the new tax regime does not bode well for manufacturers and other stakeholders in the real economy.
She further stated that the new tax regime will affect the cost of production and profit margin, with consumers at the receiving end.
“The VAT hike has implications for inflationary pressure and consumer demand. We advise the government to utilize the additional income that will be generated from the increase in VAT to develop quality infrastructure, not only on payment of worker’s salaries,” she averred.
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