LCCI Charges FG To Adopt Prudent Fiscal Policy Measures To Manage Inflation

The Lagos Chamber of Commerce and Industry (LCCI) has charged the Federal Government to adopt more prudent fiscal policy measures to effectively manage inflation and address the issue of high interest rate and exchange rate volatility in the country.

The National Bureau of Statistics (NBS) recently revealed that Nigeria’s headline inflation rate rose to 24.08 percent in July 2023, higher than the 22.79 percent recorded in June.

On a year-on-year basis, NBS stated that the headline inflation rate was 4.44 percent points higher when compared to the rate recorded in July 2022, which was 19.64 percent.

According to the NBS report on Nigeria’s Gross Domestic Product (GDP) growth rate for the second quarter of 2023, the country’s economy grew by 2.51 percent in the second quarter compared to 2.31 percent in the first quarter of 2023.

The second quarter growth implies the 11th consecutive quarter of economic growth, though lower than the 3.54 percent recorded in the same quarter of 2022.

But reacting in a statement made available to THE WHISTLER on Monday, LCCI said “This may be attributed to the challenging economic conditions caused by fuel subsidy removal and exchange rate harmonization.”

Analysis of the GDP result showed that transport & storage (–50.6%), oil & gas (–13.4%), education (1.4%), agriculture (1.5%) and other services (1.7%) are the slowest growing sectors. The growth recorded in the manufacturing sector remained low at 2.20 percent.

LCCI noted that the significant contraction recorded in transport and storage, and the sub-optimal growth in manufacturing and trade largely reflect the deregulation of the downstream oil sector, exchange rate volatility, and weak consumer demand.

“The recovery in agriculture is significant, however, growth remained low and may be attributed to insecurity and policy gaps. We also note that high growth in solid minerals is insignificant, mainly due to the sector’s relatively small size.

“The Chamber recommends that the government adopt more prudent fiscal policy measures to effectively manage inflation and address the issue of high-interest rate and exchange rate volatility. We commend the Federal Government’s declaration of a state of emergency on food security and urge them to prioritize farmers’ areas of assistance, fertilizers, and seeds to mitigate the effects of subsidy removal and create strategic food reserves to be used as price stabilization mechanisms,” the statement issued by the Director-General of LCCI, Dr. Chinyere Almona, said on the second quarter GDP growth rate.

Further analysis of the GDP result showed that growth was primarily driven by the service sector at 4.42 percent and contributed 58.42 percent to aggregate GDP. The recession in the oil sector persisted with a higher contraction of –13.43 percent in the quarter compared to –4.21 percent in the previous quarter.

“The significant decline in the oil sector reflects suboptimal daily oil production due to a lack of accountability, oil theft, pipeline vandalism, underinvestment, and rising cost of production,” LCCI said.

The non-oil sector grew by 3.58 percent, a slight expansion of 0.81 percent points compared to 2.77 percent in Q1 2023 and lower by 1.19 percent points compared to Q2 2022. The top five sectors that contributed to growth are solid minerals (31.9%), finance & insurance (26.8%), utilities (11.0%), information and communication (8.6%), and construction (3.4%).