“Nigeria’s economy is a bundle of contradictions” –LCCI

Lagos Chamber of Commerce and Industry

The nation’s population suggests a huge market but it is weakened by high poverty.

The Lagos Chamber of Commerce and Industry, LCCI, the premier chamber of commerce in Nigeria has described the Nigerian economy as a bundle of contradictions as it possesses attractiveness in the midst of daunting business challenges.

The chamber, which acts as the representative organ of the business community and the voice of the organised private sector in Lagos by maintaining regular consultations with the government on policies and measures affecting business and the economy, said the nation, blessed with a large population that suggests a huge market, is weakened by high poverty incidence and weak purchasing power.

In its May newsletter, It highlighted disconnect between expanding public fiscal operations and monetary policy from domestic production; saying although the policy has an excellent problem diagnostics and solution propositions, it lacks of the political will and/or capacity to implement.

Also, it emphasized that there was the failure to depart decisively from the ‘old way’ of: tasking businesses and private individuals with all kinds of taxes and levies only to boost government revenue rather than to energize economic activities; continuing to open opportunity windows for foreign investors to the detriment of domestic investors; while aberrations in the management and operations of the money market remain unaddressed.

Gross Domestic Product

The Chamber said the nation’s economy records “persistent macroeconomic growth that does not trickle down into real development,” adding that Nigeria recorded a 10-year average real Gross Domestic Product (GDP) growth rate of 7.02% during 2003 to 2012, which was persistently above 6% annually.

“The economy however, started slowing down in 2010. As robust as this growth seems (an average annual growth of 7% should double the GDP size), it has been without development, as most major development indices worsened during this review period” the chamber said.

It said that one of the major concerns about this non-inclusive growth is unemployment, on which the following official statistics speak volumes. It went from 5.3% in January 2007 to 5.8% in January 2008, 11.8% in January 2009, 19.7% in January 2010 and 21.1% in January 2011. Rising from the dismal level of January 2011, the rate went further north to 23.9% by end-2011.

“This is more worrisome because, among the youth (officially, 15-35 years), the unemployment rate is 42.2%. This has exacerbated social problems of all kinds, including its security implications” the chamber said.

Inflation

For some months, the nation has also been recording single digit inflation, a supposed positive development, even though the average Nigerian is yet to understand how this has impacted in their real life situations.

In April 2013, the Consumer Price Index (CPI), which measures inflation, rose by 9.1 per cent year-on-year (compared to 8.6 per cent in March).This is the fourth consecutive month of single digit year-on-year rates being recorded, and the first time this has occurred since the movement to the new CPI base period, the National Bureau of Statistics (NBS) said last week.

Relative to March, the rise in the headline index could be primarily attributed to higher price levels of food products due to the effect of declining inventories. At this time in the planting season, what is sold are food products which were harvested, late last year and the limited supplies of these farm with a relatively stable demand, pushes prices higher.

“As in March, the Core sub-index exhibited a muted rise due to base effects. Between March 2012 and December 2012, the Core Sub-index recorded substantial year-on-year price increases (an average of 14.2% compared to 11.8% over the same period in 2011). As a result of substantially higher price levels last year, the implications are that the year-on-year changes for this year are likely to be lower. Additionally, we observed generally slower rises in monthly prices since 2013. This may be connected to more prudent fiscal measures together with aggressive stance of monetary policy” NBS said.

On a month-on-month basis, the Food index increased by 0.6 per cent between March and April, the bureau said. As in March, food prices were higher across all classes in the food sub-index. According to their contribution, the largest contributors of the increase in the food index in April were bread and cereals, potatoes, yams and other tubers, and vegetables.


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