As the COVID-19 pandemic continues with consequent subdued commercial activities, the Nigerian economy may slide into a recession by the end of the third quarter of 2020 (Q3’20), the Lagos Chamber of commerce and Industry (LCCI) has warned. President, LCCI, Mrs Toki Mabogunje, gave the warning at a quarterly press briefing of the Chamber in Lagos on Tuesday.
Mabogunje stated: “It is expected that the economic fallout of the pandemic, notably disruptions to global supply chains, lockdown, travel restrictions, weakening oil prices, foreign exchange liquidity challenges and weak export would manifest in the second-quarter growth numbers, with more pronounced impact on sectors struggling with growth before this crisis. “As the pandemic protracts and commercial activities remained subdued, the prognosis is that the economy could slip into recession by the end of the third quarter.” She noted that the business community continues to reel from the unprecedented crisis precipitated by the pandemic and associated containment measures. “We note activities are yet to resume in certain sectors such as tourism, hospitality, entertainment and education. Many businesses are presently in dire financial straits as they battle with escalating costs, high receivables, loss of credit lines and other contractual obligations amid revenue shocks. The impact is more pronounced on micro and small enterprises, with inadequate financial buffers to withstand shocks of this magnitude,” she added. According to her, LCCI acknowledged the efforts so far by the Federal and State Governments, Central Bank of Nigeria (CBN) and private corporations towards assuaging the impact on the business community. She, however, noted that government needs to arrange stimulus packages for sectors that have mostly been impacted.
“We urge the government to swiftly come to the rescue of some sectors whose business models and earnings projections have substantially been disrupted by the pandemic,” she said. On the country’s rising debt portfolio, LCCI called on the government to be more cautious in the quest for borrowing. Mabogunje stated: “We call for caution on the continued use of debt to meet fiscal obligations especially at a time the country is struggling to generate adequate revenue. “The option of equity financing should be more rigorously explored, and it is a better and more sustainable financing strategy that could be deployed to bridge fiscal deficit.” The Chamber also noted that the recent adjustment of the exchange rate from N360/$ to N381/$ is a step in the right direction towards unifying the multiple exchange rates and improving transparency of the country’s forex management. It, however, noted that depreciation of the local currency has positive and negative implications for the economy. The Chamber further acknowledged the removal of subsidy on Premium Motor Spirit (PMS), saying it is stepping in the right direction in rescuing the economy from further fiscal quandary. “The transition to a market-based pricing regime in the downstream segment of the oil sector is a move in the right direction. “However, price-fixing by the Petroleum Product Pricing Regulatory Agency (PPPRA) is not consistent with the philosophy of a market-driven downstream sector. It is a contradiction in terms. It also called for an expeditious consideration and passage of the revised Petroleum Industry Bill (PIB by the National Assembly. LCCI commended the federal government on the Economic Sustainability Plan (ESP) aimed at ensuring that the economy recovers quickly from the effect of the Covid-19 pandemic and continues on a growth path sustainably. “We enjoin the government to pursue the implementation of the ESP with utmost commitment and strong political will devoid of sentiments or political affiliations, so that proposed initiatives in the plan can produce the desired outcomes.”