The President of the Lagos Chamber of Commerce and Industry (LCCI), Mr. Gabriel Idahosa, alongside the Deputy President, Engr. Leye Kupoluyi, Vice Presidents and Dr. Chinyere Almona, FCA, Director General, LCCI addressed the media on the state of the Economy on Thursday, July 18, 2024.
https://www.digital.zenithbank.com/ZEQ/ZEQ-jan-2026/index.html#p=1Herein reproduced below is the addressed-
I present the compliments of the Lagos Chamber to you all at this third quarterly press conference in 2024. Thank you for continuing with us on this journey of quarterly reviewing significant economic developments in the preceding quarter and in this particular period, the review of the second quarter of 2024, and communicating our position to the broader business community and Government. This has become our traditional model of doing public policy advocacy in our quest for a stronger economy and a more business-enabling environment. Through macroeconomic diagnostics at this briefing session, we highlight areas of concern and make recommendations to the Government on policy alternatives that can better empower the private sector to thrive. Let me especially acknowledge and appreciate the media for their contribution to driving this mandate over the years. As an institution with the mandate to protect business interests, we appreciate the commitment of the media to deepen this partnership.
1. GLOBAL ECONOMIC DEVELOPMENT
As we look back at the happenings in the second quarter and try to project an outlook for the third quarter, the global economy continues to experience persistently high inflation, aggressive global monetary policy tightening, supply chain disruptions, and growing uncertainties amidst geopolitical tensions. With many institutions reviewing their earlier global economic growth projections, the level of uncertainties has continued to threaten business and economic planning across the globe.
In terms of food and other commodity prices, according to the Food and Agriculture Organisation (FAO), the food price index (FPI) maintained an upward trend, reaching 120.6 points in June 2024, unchanged from its revised figure for May. Increases in the price indices for vegetable oil, sugar, and dairy products balanced out a decrease in the price index for cereals, while the meat index was almost unchanged. Also, average crude oil prices moderated to $81.2 per barrel in June compared to $83.55 in March 2024 and are currently at $85.18 as of 15th July 2024. We expect prices to remain at current levels until at least the end of the third quarter.
While inflation rates are easing in the USA and China, for instance, Nigeria’s inflation rate continues to rise with no positive projection yet on when it will peak and start to ease. The Chinese National Bureau of Statistics reported that China’s consumer prices eased by 10bps to 0.2% year-on-year in June, away from 0.3% in May 2024. Also, the United States headline inflation maintained its downtrend for the third consecutive month, reaching 3.1% year-on-year in June from 3.3% in May 2024.
2. THE DOMESTIC ECONOMY
A. Gross Domestic Product Report
Nigeria’s economy grew by 2.98% (year-on-year) in real terms in the first quarter of 2024, slightly down compared to 3.46% in the last quarter of 2023, but notably an improvement when compared to 2.31% in the first quarter of 2023 and an annual GDP growth of 2.74% in 2023. The growth in the first quarter of 2024 is the fourteenth consecutive growth recorded and was driven by both oil and non-oil sectors, which grew by 5.70% and 2.80%, respectively. However, the economy in the first quarter of 2024 was threatened by low productivity growth in agriculture and manufacturing due to insecurity, high cost of production, high inflation, and volatility in the forex market.
B. Assessment & Outlook
The growth in the first quarter was primarily driven by the non-oil sector, which recorded a growth of 2.80% and contributed 93.62% to the GDP. In particular, the fastest-growing sectors in the economy include solid minerals, finance & insurance, oil & gas, ICT, arts, entertainment & recreation, and transportation and storage. It is important to note that most sectors that recorded significant growth are small, except ICT.
The Q1 2024 GDP report showed that growth in agriculture, Nigeria’s largest single economic sector and employer, was very weak at 0.18% compared to 2.10% in the previous quarter. This reflects a marginal growth of 1.71% in crop production and contributed over 91% of the total output in the sector. The livestock and fisheries sub-sectors recorded weak performance. We expect to see some improvement in these sub-sectors with the creation of the Ministry of Livestock Development by the Federal Government.
The manufacturing sector also continued to struggle, recording a weak growth of 1.49% in the first quarter compared to 1.61% in the corresponding quarter of 2023. The weak performance is obviously due to weak consumer demand due to weakened purchasing power and high cost of production due to FOREX illiquidity, high interest rate, etc.
C. Policy Responses.
1. We urge the Government to tackle the problem of insecurity, which has continued to threaten productive activities in the real economy sector. While we appreciate the government’s efforts in fighting all manner of crimes and insurgencies, we believe more can be done until we have a safe environment where farmers can produce and move their goods from farms to markets in certain areas of the country.
2. On managing the persistently high inflation, we recommend that monetary and fiscal authorities focus on the factors driving the inflation rates by tackling supply-side deficiencies instead of focusing too much on demand-side management.
3. We urge the CBN to be consistent with the FOREX market reforms until we see the desired impact on the rising inflation rate and burdening high interest rates.
4. We recommend the CBN explore alternative policy measures that promote credit access, stimulate investment, and support entrepreneurship. This could include targeted interventions such as concessional lending facilities, loan guarantees, and interest rate subsidies tailored to the needs of SMEs and key sectors of the economy like agriculture, manufacturing, and power technology.
5. On power supply, the government should create the needed environment where local meter manufacturing can thrive to bridge the current gap in meter deployment. This will reduce the pressure on the foreign exchange market, create jobs, generate revenue for the government, and develop local expertise in meter manufacturing.
6. Other areas of intervention could be adopting a cheaper duty rate for importing agricultural inputs for local manufacturing and investment in building agro-industrial hubs across the country.
3. MONETARY POLICY DEVELOPMENTS
During the second quarter of 2024, the Monetary Policy Committee (MPC) met for the third time in 2024. The Committee rose from its meeting in May to increase the Monetary Policy Rate to a record 26.25% from 24.75%. All the other parameters were left unchanged. In their July meeting, we estimate that the MPC may be tempted to hike rates further since inflationary pressures and money in circulation remain high. However, we recommend that the MPC consider an easing disposition to interest rates in the face of multiple burdens on businesses.
The private sector, which serves as the engine of growth and employment generation in Nigeria, is plagued with increased borrowing costs, reduced investment incentives, heightened uncertainties in our policy environment, and a pressured foreign exchange market. The recent hikes in the MPR have directly translated into higher interest rates, making it more expensive for businesses to access credit for working capital, expansion, and sustainability. With the high treasury bills and bond yields, the government attracts investments from local and foreign portfolio investors. This is, however, crowding out the private sector from accessing credit and we lament the drying up of funds from the private sector to government treasuries.
The real sector has the capacity to create more jobs, manufacture products for consumption and export, as the economy’s industrial base.
4. INFLATION
The headline inflation continued its upward trend in June 2024, accelerating to 34.19% compared to 33.95% in the previous month and 22.79% in the corresponding month of 2023, implying 0.24% and 11.40% points higher, respectively. Food prices in June increased by 40.87% from 40.66% in May on a year-on-year basis, implying a 0.21% rise. The inflationary surge, particularly in food prices, poses a significant challenge to the economic well-being of Nigerians. These inflationary pressures exacerbate the precarious living conditions of millions of Nigerians and further amplify social and economic vulnerabilities.
The LCCI lauds the recent step the Federal Government took in approving import duty waivers for food imported for 150 days on selected food items. We, however, urge the government to focus more on boosting the supply side and drop the idea of a Recommended Retail Price for food items. In a free market economy, the forces of demand and supply will always determine prices. While we support promoting and empowering local production, emergency interventions like this are not out of place since they are meant to fill a gap that local production capacity cannot achieve in the short term.
More direct and targeted interventions should be focused on agricultural mechanization, agricultural research, the adoption of lower import duty exchange rates used to import agricultural input, and the establishment of more functional agro-industrial hubs across the country.
Considering the foregoing, the LCCI recommends the following strategies to address the rising inflationary trend and foster economic stability:
a. The federal government needs to invest more in building the required infrastructure to drive the deployment of Compressed Natural Gas CNG-powered transportation. Since this is perceived to be cheaper than petrol, we see it as having the capacity of driving down transport costs. We need the basic infrastructure, which is charging facilities.
b. Prioritize smallholder farmers and vulnerable groups, including women and youth, for targeted assistance.
c. Promote the integration of fertilizer distribution with other agricultural value chain interventions, such as improved seeds, irrigation, and post-harvest management.
d. Support the development of local fertilizer production capacity to reduce import dependency and enhance long-term sustainability.
e. Utilize information and communication technologies (ICTs) to disseminate agricultural advisory services, market information, and weather forecasts to farmers.
f. Empower farmer cooperatives and associations to play a central role in distributing and managing subsidized inputs and access to finance.
g. Urgently improve transportation infrastructure, including road networks, to reduce the cost of transportation and mitigate inflationary pressures across various sectors of the economy.
h. Efforts should be intensified to strengthen agricultural value chains, including establishing adequate storage facilities and promoting agro-processing industries to reduce post-harvest losses and enhance food security.
5. THE FOREIGN EXCHANGE MARKET
The dynamics in the foreign exchange market have continued to depreciate the value of the Naira driven by weak supply, uncertainties, and increasing demand’. With the Naira exchange rate above the N1500 level against the Dollars, the CBN may need to rejig its reform strategies towards boosting supply and liquidity in the market. Generally, analysts continue to blame the decision to harmonize the official and parallel market rates for the crash in the value of the Naira against major currencies.
We see the possibility of the Naira gaining some value before the end of this year. The billions of dollars expected from the sales of marginal oil fields, achieving a higher oil production level, and the possibility of an increase in oil price may all play a role in driving supply to record levels and helping the Naira to appreciate towards the N1000 mark. We urge the monetary authorities to reconsider a review of the free-floating exchange rate
The depreciation was fundamentally driven by low supply to the market, but speculative activities played a huge role in distorting the real value of the Naira. Before the end of the first quarter, the Naira firmed up due to some FX policy reforms undertaken by the CBN. The CBN needs to sustain its interventions and improve supply in the FX market, adopt policies that would attract more FX inflow into the economy, and build market confidence in the performance of the Naira even in the long run.
6. THE MINING AND SOLID MINERALS SECTOR
We urge the government to develop a comprehensive industry strategy to attract mineral exploration investments, reignite mineral development, accelerate new mineral discoveries, and encourage optimal utilization of Nigerian mineral resources in line with the Environmental, Social, and Corporate Governance (ESG) principles for sustainable growth. Furthermore, we urge the government to address the sector’s funding issue and increase access to finance to develop value-added products by establishing seed funds and attracting foreign and local investments. For value addition that will enhance local production and job creation, create linkages across the mineral sector and beyond.
The Government should consider revitalizing the Ajaokuta Steel Company Limited (ASCL) and the Nigerian Iron Ore and Mining Company (NIOMCO) by adopting the best arrangement to free them from all hindrances and ultimately make them operational and viable. We have consistently advised that the model of NLNG management can always be adopted with other projects like the ones in the solid minerals sector. To ramp up investments in this sector, we need to deploy more relevant research and technology to trace more mineral deposits, refine minerals with value addition to them, and make more statistics available for planning and strategy.
The government should learn from the hindrances we presently experience in the Niger Delta for the failure of allowing small crude refineries to operate under some supervision and standards. For the solid minerals sector, we should adopt an inclusive strategy that integrates Artisanal and Small-Scale Mining (ASM) policy into a broad rural development strategy aligned with development plans at all levels of government and linked to other national rural sector strategies. This will make the solid minerals sector more integrated and linked to other sectors, with more activities that will generate more jobs in rural areas.
7. POWER SUPPLY AND ENERGY TRANSITION
We acknowledge that removing the subsidy on electricity supply may have been in line with attracting foreign investors into the sector with a cost-reflective tariff. We have also advocated that we subsidize production instead of consumption. However, our primary concern is seeing businesses pay heavily for services they do not enjoy optimally. It is a grave concern that with a higher power cost, companies still do not have access to the service.
We call for an aggressive metering programme that leads to 100 percent coverage of electricity consumers. This guarantees liquidity for the distribution companies and gives consumers more satisfaction with paying for what they consume. Earlier in the year, a global business media, Bloomberg, reported that ‘Nigeria has a woeful lack of generating capacity and part of the energy that is produced goes to waste because it can’t be distributed through the dilapidated grid. Electricity suppliers can’t charge cost-reflective tariffs and struggle to collect revenue due to inadequate metering, deterring new investment’. Beyond infrastructure provision, we need a sound regulatory and policy environment to attract more foreign investment into the power sector.
We advise creating an environment enabling foreign investors to build renewable energy factories in Nigeria to upscale our energy transition and reduce our dependence on the national hydro grid, which has continued to crash at close intervals in recent months. We urge deep commitment to the Presidential Metering Initiatives’ target of installing about two million meters annually over the next five years. We expect the federal government to show more commitment to patronizing local meter manufacturers to boost local content development and foster growth in the power sector.
8. OIL AND GAS SECTOR DEVELOPMENTS
We are happy to note that there is some form of respite on the issues around crude supply to the Dangote Refinery by the International Oil Companies (IOCs). As the regulator, we call on the government to provide detailed information on their efforts to resolve these issues and show capacity to regulate this sector. This is critical as uncertainties like this can be a disincentive to potential investors in the oil and gas sector. The regulatory agencies must show the capacity to resolve issues about protecting investors’ interests. The investors here are the Dangote Refinery, the IOCs, and other local refineries in the country.
Oil is an international commodity traded on open trade terms in the international markets. The issues around supply contracts, higher prices above international crude prices, and the cost of logistics should be quickly resolved before they damage investors’ confidence in the sector.
We urge the government to remain close to the emerging issues around pricing and supply contracts amongst all parties to create an environment where the IOCs and all other parties can trade profitably together, create jobs, and generate revenue for the government. We can all learn from these teething issues to enrich our oil and gas sector regulation for better performance. We acknowledge the efforts made so far by the government in calling the IOCs to supply crude to Dangote Refinery, we add our voice to say both parties should consider more of dialogue on their offers negotiated within international best practices and as moderated by the sector regulators.
The need to strengthen the Naira through boosted supply of FOREX into the Foreign Exchange Market (FEM) cannot be over-emphasized at this point. Therefore, we are happy to note the increased crude production and a good price level in the international market. We must take this opportunity to restore a true value to our currency through real and strong fundamentals.
9. THE ESTABLISHMENT OF FEDERAL MINISTRY OF LIVESTOCK DEVELOPMENT
The LCCI acknowledges the federal government’s decision to establish the Federal Ministry of Livestock Development. This initiative marks a significant shift in Nigeria’s agricultural policy landscape. However, it is imperative to view it from the broader implications for the economy and the business community. We call on the subnational governments to replicate this in their domains and reduce the persistent clashes over production locations.
Creating a dedicated ministry can provide targeted policies and resources to address the specific needs of the livestock sector, potentially leading to increased productivity and efficiency. A robust livestock and fisheries sector can boost the agriculture sector’s contribution to our GDP and help curb the record-high food inflation.
The performance of livestock and fisheries sub-sectors was very weak, as reported in the first quarter of 2024. We therefore suggest changing the name of the new ministry to the Federal Ministry of Livestock and Fisheries Development, leaving the Federal Ministry of Agriculture and Food Security to focus mainly on crop production. We look forward to a seamless transition of the new ministry into full operations without delays and deploying a prudent mechanism in the face of rising criticism of the high cost of governance.
The Chamber urges the Federal government
a. To involve all relevant stakeholders, including farming communities, pastoralists, state governments, and private sector entities, in formulating and implementing policies and establishing clear communication channels to ensure transparency and foster stakeholder trust.
b. To develop integrated land use policies that balance the needs of pastoralists and farmers, ensuring that both groups have fair access to resources and implement land acquisition and compensation frameworks that respect the rights of Indigenous communities and landowners.
c. To encourage the transition from traditional nomadic grazing to modern ranching systems, which can increase productivity, reduce conflicts, and provide incentives for private sector investment in ranching infrastructure, including access to credit, technical assistance, and subsidies.
d. To enhance security in rural areas to protect both farmers and pastoralists from violence and theft and implement community policing and conflict resolution mechanisms to address disputes promptly and fairly.
e. To carefully plan inclusive policies and sustainable practices essential to ensure this initiative contributes positively to national development and social harmony.
f. To encourage Pastoralist clusters at the Local Government levels for ranching effectiveness.
g. To educate and train pastoralists on modern-day ranching. Also, creating awareness on the implications of open grazing and the advantages of Ranching.
- EXCHANGE RATE FOR IMPORT DUTIES
According to our last checks, the exchange rate for import duties by the Nigeria Customs Service (NCS) continues to rise, reaching N1549 to the USD. This represents an increase of N37 from the previous rate of N1512/USD. We have always advocated that this rate used in computing import duties should be a fixed amount lower than the official rate and left unchanged for a period of time to help business planning.
Earlier, the Presidential Committee on Fiscal Policy and Tax Reforms recommended that the FX rate for customs duties be pegged to the 2024 budget benchmark to assuage the effect of volatile exchange rates on the business community, especially manufacturers and importers. The Committee recommended N800/$ as the standing rate till the end of the year to combat inflation and enable business planning. This will be another form of non-cash intervention we recommended earlier.
- THE 2024 FEDERAL BUDGET PERFORMANCE
In the history of the Nigerian economy, the 2024 Federal budget is the largest at N34.9 trillion (once the Senate approves the amendment to the Appropriation Act to accommodate the additional N6.2 trillion proposed by the Federal Government). The latest budget performance report showed that only N1.84 billion had been achieved so far out of the budget’s N9 trillion capital expenditure component (before the amendment).
A. The capital expenditure released so far is too small in the face of the magnitude of the infrastructural deficit that businesses suffer from. With the new capital expenditure component of N12.2 trillion and a release of only N1.84 trillion at mid-year, we definitely need to speed up the release of funds for capital projects in the next quarter to boost economic growth.
B. We want to advise that the government is faithful to deploying the additional funds on business-boosting infrastructure as proposed to the National Assembly.
C. A major challenge with budget performance has always been weak revenue generation. The government must be innovative and sensitive in its quest to drive revenue generation to fund the budget deficit.
CONCLUSION
Distinguished Gentlemen of the Press, you have been a worthy partner in projecting our engagement with the government towards creating an enabling investment environment for advancing the Nigerian economy and the good of all investors and economic players. Through engagements like this press conference, the Lagos Chamber has consistently lent its voice to possible solutions to our nation’s challenges.
Let me reiterate our call on the government to tackle the many economic issues discussed above (though not exhaustive) to deliver democratic dividends to Nigerian citizens and businesses. As a private sector advocacy group with the mandate to promote the business community’s interests, the Lagos Chamber shall continue to engage relevant government agencies, the media, and other interest groups, where and when necessary, on actionable recommendations for a thriving business community.
