· Doubts govt’s commitment to enforce policy reforms
· Recommends strict execution of structural reforms
Amid the resurgence of COVID-19, the Lagos Chambers of Commerce and Industry (LCCI) has predicted that Nigeria risks a further perpetuation of the current recession if the pandemic persists into the first quarter of 2021.
LCCI, Africa’s second chamber of commerce with over 2,500 registered members, has equally acknowledged that the federal government initiates long-standing policy reforms in response to the socio-economic realities, though doubted its capacity to implement the reforms.
These were revealed in LCCI’s Economic and Business for 2020 and Outlook for 2021, which its Director-General, Dr. Muda Yusuf released to the media in the early hours of Sunday.
For the second time in five years, Nigeria officially slid into its worst economic recession in over three decades in November, according to the National Bureau of Statistics (NBS).
The country recorded a contraction of 3.62% in the third quarter of 2020. The cumulative GDP for the first nine months of 2020 stood at 2.48%. The last time Nigeria recorded such GDP was in 1987, when GDP declined by 10.8%.
In its latest outlook, LCCI said economic discourse globally and domestically would centre on recovery in the coming year, though noted that the resurgence of the pandemic is a threat to global economic recovery.
It, also, observed that the Nigerian economy “risks a further perpetuation of the current recession if the pandemic persists into the first quarter of 2021.”
In the pre-pandemic era, the report observed that the Nigerian economy was already in a fragile and precarious position, which it claimed, was worsened by the outbreaks of COVID-19 and its resurgence.
It admitted that the Nigerian economy was faced with myriad challenges including subdued economic growth, falling income per capita, rising inflation, external vulnerabilities, escalating debt profile, insecurity, high unemployment incidence and weak investment confidence.
It noted that these challenges were amplified by COVID-19 induced disruptions as the economy lacked adequate buffers to suppress the shock.
Consequently, the report observed that several governments globally provided fiscal stimulus to support households, small businesses, and their economies generally, while central banks eased monetary policy conditions through large-scale purchases of financial assets and interest rate reduction to rescue their respective economies.
But in Nigeria, it noted that the federal government developed the Nigerian Economic Sustainability Plan (NESP) with a total stimulus package of N2.3 trillion to address liquidity concerns of small and medium-sized businesses mostly impacted by the pandemic, provide financial support to the vulnerable segment of the populace, and create jobs, among others.
Similarly, according to the report, the Central Bank of Nigeria shifted its policy focus from price stability to the stimulation of economic recovery and growth in the year 2020 to complement the federal government’s fiscal stimulus in a bid to support business continuity and economic sustainability.
It noted that the adverse impact of the pandemic on the country’s fiscal resources propelled the federal government to undertake long-standing policy reforms.
According to the report, the reforms include the partial removal of fuel subsidies, introduction of service-reflective tariff model, transmission of the Petroleum Industry Bill (PIB) to the National Assembly and reduced dependence of CBN financing of the budget deficit.
It, however, observed that the federal government “is yet to demonstrate a consummate commitment to the effective implementation of these reforms.
“Towards the end of year 2020, there was strong momentum towards the discovery of covid-19 vaccine and this positive development is expected to strengthen global economic rebound in 2021 in the absence of any major shocks,” the report recommended.
It also recommended quick implementation of structural reforms including review of the foreign exchange management framework and significant investment critical infrastructure development projects are imperative to foster economic resilience in 2021.
It predicted that the resurgence of COVID-19, African Continental Free Trade Area, Power sector reforms, finance bill 2020, passage of Petroleum Industry Bill, external sector trends, a new national economic development would largely shape the government’s policy direction in 2021.