The Lagos Chamber of Commerce and Industry (LCCI) has projected that the Nigerian economy will end the current year with a growth rate of two per cent or 2.5 per cent in 2021.
Mrs Toki Mabogunje, President, LCCI, made the projection at the 133rd Annual General Meeting (AGM) of the chamber on Thursday in Lagos.
Mabogunje said that the fiscal and monetary sides of the economy should promote growth-enhancing and confidence-building policies that would encourage private capital flows to the economy to achieve the growth.
She added that fiscal and monetary authorities must develop a medium-term recovery plan anchored on local productivity, ease of business, attracting private investment, and developing physical and soft infrastructure.
The LCCI President, however, anticipated the country’s inflation figure to be sustained at its double-digit level in the short to medium term.
This, she said, was largely driven by persistent food supply shocks, foreign exchange illiquidity, higher energy cost, potential removal of fuel subsidy, insecurity and social unrest in the Northern region.
“These structural factors will continue to mount pressure on domestic consumer prices,” she said.
Mabogunje, noting the non-oil economy growth by 5.4 per cent, said the worsening security challenges in some parts of the country, may cause production to shrink and supply chain to be disrupted.
“Key drivers of the non-oil sector growth were finance and insurance with 23.2 per cent, transport and storage 20.6 per cent, trade with 11.9 per cent, telecommunications 10.9 per cent.
“Others are manufacturing 4.3 per cent, construction 4.1 per cent, real estate 2.3 per cent as well as agriculture 1.2 per cent all year round.
“However, with the worsening security perception about the country, foreign investors are not interested in bringing in Foreign Direct Investments to Nigeria,” she said.
On the decision of the Monetary Policy Committee of the Central Bank of Nigeria to retain policy parameters, Mabogunje said its credit provision might not yield desired outcome.
She said this desired outcome was if the structural challenges stifling domestic productivity remained unaddressed.
“While the CBN has been keen to extend credit to the real economy as a way of supporting the economy.
“The fact remains that credit provision in recent times has proved ineffective in boosting output growth and stabilising consumer prices.
“This is given the weak pass-through effect of traditional monetary policy instruments on the broader economy.
“A broad-based combination of fiscal and monetary policies is imperative to achieving the twin objective of economic growth and price stability.
“Looking forward, factors such as oil prices, oil production, output growth, inflation, foreign exchange stability, foreign capital inflows, credit to the private sector are expected to influence monetary policy.
“These decisions are decisions in the short to medium term.
“On the fiscal side, we expect to see clear communications and actions on the proposed fuel subsidy removal and how this will ease government’s revenue and boost investment in infrastructure,” she said.