The Lagos Chamber of Commerce and Industry (LCCI) on Tuesday commended the monetary authorities on recent policy measures adopted to manage the economy and canvassed the need for improved non-oil revenue and infrastructure development to sustain the current growth trajectory in the nation’s economy.
The President of the organized private sector (OPS) umbrella body, Mrs. Toki Mabogunje, at a media conference in Lagos, said the measures had become imperative for adoption by the governments in view of the current developments in the global economic space, particularly to make Nigeria’s economy resilient, job-supportive and poverty-alleviating.
Reflecting on recent monetary policies of government, Mabogunje said the Chamber welcomed the adoption of the Nigerian Autonomous Foreign Exchange Rate (NAFEX) as the official exchange rate, as the unification is expected to improve the country’s currency management framework given that the multiple exchange rate systems had been creating uncertainty issues and sources of arbitrage.
In addition, she said the development was expected to bolster the confidence of foreign investors in the economy and also help the country to unlock external financing opportunities particularly from key multilateral institutions such as the World Bank and the IMF, who had for long advocated for a unified and flexible exchange rate system.
She explained that the Chamber,however, noted that whenever there was a depreciation of Naira Exchange Rate at the parallel market segment, as we are currently witnessing, the Central Bank of Nigeria (CBN) apply demand containment and/or price control measures as seen from the 43 items ban and quest to peg the exchange rate of the Naira.
Mabogunje pointed out that tightening measures had always failed to stabilize the exchange rate in Nigeria, it only redirects FX transactions to the underground arrangement, with unintended consequences of increased pressure on the exchange rate and creating wide premium between the official and parallel market exchange rate {N162 premium gap between I&E window rate of N412 (CBN) and the parallel market rate of N574 (EIU)}
According to her, the forex market is still faced with liquidity challenges as many investors are lamenting about the difficulties in accessing foreign exchange for the importation of raw materials, equipment, and critical inputs for production and processing.
She lamented that the situation was taking a huge toll on capacity utilization, recovery, and sustainability of businesses in the production sector.
On recent monetary policy regime, the LCCI President said that the Chamber noted the decision of the Monetary Policy Committee of the Central Bank of Nigeria to retain the Monetary Policy Rate (MPR) at 11.5%; Asymmetric corridor around the MPR at -700/+100 basis points; Cash Reserve Ratio at 27.5% and Liquidity Ratio at 30% during its September 2021 meeting.
She said that the OPS group also noted that the committee was faced with a policy dilemma of trying to maintain a balance between stimulating growth and ensuring price stability as the economy is currently in stagflation, evidenced by high inflation, high unemployment level, and recovering but fragile growth.
Mabogunje further explained that weighing the pros and cons of monetary accommodation and tightening, retaining policy parameters was the most appropriate decision in the light of prevailing macroeconomic conditions.
She expatiated: “We acknowledge and endorse the recommendations presented by the MPC at its last meeting. Key among them include the need for the Federal and state governments to show more commitment to the insecurity challenge considering its multidimensional impact on the economy; and the need for an effective synchronization of fiscal and monetary policies to improve the investment climate to attract sustainable foreign direct investments into the economy as this would also help to stabilize the exchange rate and boost output growth; and the need for government to explore private sector collaboration in infrastructural development in the light of prevailing fiscal conditions.
“While the committee 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; and the need to improve the agricultural value chain, particularly in key commodity products like cocoa, palm oil, and cashew to diversify the country’s export receipts.
“We join the call on the Bank to support manufacturing initiatives that could achieve this objective”, the LCCI boss added.
On Government revenues, the Chamber recommended that the Federal Government should improve its tax collection to reduce its dependence on oil revenues and reduce its exposure to counter-cyclical shocks.
It also lauded the continued resilience of the banking system, noting the progressive decline in the non-performing loans ratio, and broad improvement in all banking system parameters, despite the downside risks posed by the Pandemic to the smooth running of businesses.
“While we are cognizant of the credit risks associated with lending in the current economic climate, we urge Nigerian banks to extend more credit to businesses and consumers to facilitate a seamless recovery of output growth, reduce unemployment and stabilize prices”, Mabogunje advised.
In addition, the Chamber also charged the Presidential Task Force on COVID-19 to intensify efforts toward procurement of more vaccines and the vaccination of more people to ensure that herd immunity is achieved.
