LCCI Blames Manufacturing Sub-optimal Contribution to GDP on FX Volatility, Weak Consumer Demand

Dike Onwuamaeze

The Lagos Chamber of Commerce and Industry (LCCI) has attributed the sub-optimal growth in manufacturing and trade as well as the significant contraction recorded in transport and storage on “the deregulation of the downstream oil sector, exchange rate volatility, and weak consumer demand.”

The Director General of the LCCI, Dr. Chinyere Almona, in a public statement titled “LCCI Statement on Nigeria’s Q2 2023 GDP Growth Rate,” which said that, “the growth recorded in the manufacturing sector remained low at 2.20 per cent.”

The chamber noted that analysis of the GDP’s result as released by the National Bureau of Statistics showed that growth was primarily driven by the service sector at 4.42 per cent and contributed 58.42 per cent to aggregate GDP.

It added that, “the recession in the oil sector persisted with a higher contraction of –13.43 per cent in the quarter compared to –4.21 per cent in the previous quarter. The significant decline in the oil sector reflects suboptimal daily oil production due to a lack of accountability, oil theft, pipeline vandalism, underinvestment, and rising cost of production.”

Almona also noted that the “recovery in agriculture is significant,” even though that “growth remained low and may be attributed to insecurity and policy gaps.

She said, “We also note that high growth in solid minerals is insignificant, mainly due to the sector’s relatively small size. The chamber recommends that the government adopt more prudent fiscal policy measures to effectively manage inflation and address the issue of high-interest rate and exchange rate volatility.

“We commend the federal government’s declaration of a state of emergency on food security and urge them to prioritise farmers’ areas of assistance, fertilizers, and seeds to mitigate the effects of subsidy removal and create strategic food reserves to be used as price stabilization mechanisms.”

Commenting on the Q2 2023 GDP, the Centre for the Promotion of Private Enterprises (CPPE), noted that growth improved marginally by 20 bases points from 2.31 per cent in the first quarter of 2023 to 2.51 per cent in the second quarter. It, however, added that it slowed when compared to second quarter of 2022 which was 3.54 per cent. 

According to the Director/CEO of CPPE, Dr. Muda Yusuf, the economy slowed amid shocks from current economic reforms that impacted energy prices and the Naira’s exchange rate.

He, therefore, advised the federal government to strike “a delicate balancing act and strategic sequencing in the implementation of its economic reform programmes in order to engender inclusive economic transition.”

Yusuf, in a press statement titled, “Comments on the Second Quarter 2023 GDP,” remarked that the adverse impacts of the reforms are disproportionately higher than expected.

He said: “The Nigerian economy is still going through corrective reforms to remove some fundamental distortions and restore the economy back to the path of recovery and growth. But implementing the reforms is an arduous task as the tradeoffs are profound and the social impact has been devastating. Given the inevitability of the reforms, their implementations call for a delicate balancing act and strategic sequencing to ensure an inclusive economic transition.”

He added, “Dealing with the issues of insecurity, spending priorities, corruption, productivity and competitiveness, regulatory environment and macroeconomic stability are paramount to rebuilding the momentum of economic growth and development.”

The Q2 GDP growth, he added, fell short of the sub-Sahara projected average of 3.1 per cent for 2023, “but is better than projections for the Euro Zone of 1.0 per cent and the United States of 1.8 per cent.”