THE Lagos Chamber of Commerce and Industry (LCCI) has expressed concern over the inability of businesses to access foreign exchange (forex) for the importation of raw materials for production, noting that the forex market is still faced with liquidity challenges.Its President, Toki Mabogunje, at a media parley on the state of the economy, explained that many investors were still lamenting the difficulties in accessing forex, maintaining that the situation is taking a huge toll on capacity utilisation, recovery and sustainability of businesses in the manufacturing sector.
She, however, stated the need for the government to explore private sector collaboration in infrastructural development in the light of prevailing fiscal conditions.“We suggested the issuance of diaspora bonds targeted at specific projects. We also encourage the government to explore equity options, which has proved to be more sustainable and cost-effective than debt. Connecting local assets to global liquidity by transferring a certain portion of ownership in key state enterprises to private investors would greatly encourage investment inflows into the economy and unlock revenue opportunities for the government. Furthermore, we restate our position on the need for government to ensure that borrowed funds are tied to specific assets with prospects for sustaining the productive capacity of the economy,” she said.According to her, Nigeria’s actual output performance is still below its potential output level as recorded in the pre-COVID-19 period, pointing out that achieving key development outcome such as employment creation and poverty reduction will always remain elusive in the light of fragile recovery.She stated the need for policymakers to pursue critical reforms to bolster confidence in the economy, accelerate post-pandemic recovery and alleviate poverty.
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The LCCI chief added that accelerating the pace of recovery requires fiscal and monetary policymakers to be well-coordinated in promoting growth-enhancing and confidence-building policies that would encourage private and foreign capital inflows into the economy.She called for efforts towards making the business environment more conducive for MSMEs and large corporates at the national, sub-national, and local government levels are imperative.“This can be achieved by addressing the structural bottlenecks and regulatory constraints contributing to the high cost of doing business. A supportive and conducive investment environment is critical in facilitating private sector involvement in the economic recovery process. Beyond the issues around the collection and distribution of the Value Added Tax (VAT), the government must become more concerned about the needs of the goose that lays the eggs, the private sector,” she advised.On the Petroleum Industry Act (PIA) 2021, she noted that expectations are high as the country seeks to see deepening deregulation efforts in the downstream oil industry by ensuring a market-reflective pricing model for petroleum products; saying that the successful implementation of the Petroleum Industry Act is expected to drive private investment in the oil and gas sector, and would intensify diversification efforts within the oil sector to gas and other petrochemical products.
“There is need for clarity in the government’s policy direction by ensuring consistency in economic policies. Policy consistency is imperative for long-term investment planning and business projections. Holistic and dynamic review of the security architecture to address the seemingly worsening security situation in the country,” she added.She noted with serious concerns the worsening security situation in the country, warning that banditry attacks, abduction, herders-farmers conflict, vandalism, and insurgency have become recurring incidences in Nigeria.She said the impact of these crises on the Nigerian economy remains profound and multi-dimensional as the crisis has crippled lots of private and public investments across the nations.She added that many households have lost their means of livelihood. Many farmlands across the country have been destroyed with a consequent impact on food production and security.“The situation has projected the economy as an unsafe destination for private and foreign investments. If unaddressed, it could thwart the government’s efforts in attracting foreign capital into the economy. We note that investor confidence in the economy had been weak before the Covid19 outbreak, and many investors still see Nigeria as a risky environment despite stronger oil prices and exit from recession,” she said. In her words: “Confidence may not be restored in the near term if there is no significant improvement in the security environment.
The situation has also impacted fiscal position by making government incur additional expenditure as contained in the supplementary budget, mainly to fund security operations. This could worsen the 2021 fiscal deficit in light of low revenue mobilization.”
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