The Lagos Chamber of Commerce and Industry (LCCI)
has predicted a bleak future for the Nigerian economy in the short and medium
term due to the impact of COVID-19, which might cause Nigeria's GDP to plunge
by 3.4 per cent as the International Monetary Fund(IMF) forecasted.
The chamber gave this prediction on Tuesday during
its quarterly press briefing on the state of the Nigerian economy, which was
held at the Commerce House in Lagos to address the country on issues bothering
on the economy and the private sector at this critical period in the national
and economic history.
The President of LCCI, Mrs. Toki Mabogunje, who
addressed journalists, said: “Following the fallout of the COVID-19 pandemic,
we see the short to medium-term outlook for the economy as bleak, just as the
pandemic has led to an unprecedented collapse in commodity prices, capital
flight, turmoil in the capital market, supply chain disruption across sectors
and destabilisation of commercial and economic activities.
“Hence, we resonate with the IMF position on a
looming severe contraction of the economy by the end of 2020.”
Mabogunje, however, stated that the current COVID-19
experience presented Nigeria with ample opportunity for the government and
policymakers to pursue structural reforms and put in place home-grown policies.
“Reforms such as the liberalisation of the
petroleum downstream sector, exchange rate convergence, securitising
government’s equities in joint ventures, privatising government’s redundant
assets, PPP-led infrastructural development, export diversification, agro-based
industrialisation and cut in governance costs are direly needed to aid the
rebound of the economy going forward and especially in times of adversity,” he added.
The chamber noted that the continued depletion in
external reserves by 12 percent or $4.7 billion between January and mid-April
2020 would limit the extent the Central Bank of Nigeria (CBN) could intervene
in the foreign exchange market.
It remarked that about a third of Nigeria’s foreign
reserves belonged to foreign portfolio investors in open market operation (OMO)
and warned that “the continued dependence on portfolio investment is
unsustainable, as foreign investors may develop apathy for naira assets in the
face of an impending recession.”
It also noted that the technical devaluation of the
naira by the CBN has implications for production cost, project cost with foreign
currency components, imports, investment, consumer prices and cost of servicing
foreign currency obligations by corporate organisations and government.
“We believe that another ‘price adjustment’ is
inevitable in the next three months if global oil prices fail to pick up by the
end of the second quarter,” the chamber said, adding that “harmonising the
multiple exchange windows into a single window and a market-driven or
liberalised foreign exchange system should be the goal.”
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