The Lagos Chamber of Commerce and Industry (LCCI) has released its economic outlook for 2020, projecting high cost of doing business in Nigeria.
The Director General of LCCI, Muda Yusuf, in its 2019 economic review and outlook for 2020 identified infrastructural challenges such as erratic power supply, congestions at ports, inefficient road and railway system combined with the multiplicity of levies, inconsistency in government policies and excessive regulations as constraints that may continue to hinder ease of doing business in 2020.
Though, he noted that while Nigeria may record improvement on the Ease of Doing Business Ranking as a result of some recent policy measures, realities on ground will continue to differ if the challenges highlighted are not properly addressed.
According to him, performance of trade sector in 2020 will be shaped by the direction of government policies.
“In our opinion, continued protectionist measures of government will most likely limit growth in 2020. Elsewhere, the level of the country’s engagement in Africa Continental Free Trade Area (AfCFTA) scheduled to kick-off July 1, 2020, will also impact the performance of trade sector.
“We believe government will maintain its protectionist economic policies in 2020. While protectionist policies might help local industries stay afloat albeit it makes them remain less competitive to their foreign counterparts.
“It is probable that government will leave the land borders shut till it gets the desired level of commitment from neighbouring countries.”
He however noted that the economy will continue to feel the heat of the policy action in 2020 in terms of higher food prices due to supply shortages; while reiterating that effective border policing, not shutting the borders, is a better approach to curtail smuggling.
“In furtherance, we see the Central Bank of Nigeria maintaining status quo in 2020 by restricting Forex supply to the 43 items on the exclusion list. While the policy has benefited some investors, it has penalised others. We also believe that the CBN will raise the bar on loan-to-deposit ratio from 65percent to around 70percent by 2020, in a push to improve credit flows to the real sector to stimulate economic growth,”
“However, while an upward review of LDR will help key sectors such as manufacturing perform better, it could worsen the asset quality (raise non-performing loans) as the domestic economic landscape is still fragile and borrowers might find it difficult to fulfil obligations,” he said.
On debt profile, LCCI outlook for 2020 expects the country’s debt profile to trend upwards by 2020 on approval of $3billion credit facility from World Bank for power sector reforms; possible ratification of $29.96billion loan request for infrastructural development; wider fiscal deficit (2020: N2.7trn; 2019: N2.1trn); increased appetite for government securities by institutional investors following their exclusion from OMO.
However, it noted that the rising indebtedness of the economy calls for concern as increased debt stock failed to stimulate neither growth nor infrastructural development. “Given Nigeria’s revenue challenges, the country will continue to spend a large chunk of its earnings to service debt,”
“The potentials for growth of the Nigerian economy is immense but we should not remain a nation of potentials. In order to unlock these huge potentials, we need to put in place appropriate policies, regulations and institutions. Investment is critical to the growth of any economy. This is even more so, in an economy that is struggling with revenue and other resources. Growth in private investment will boost employment, impact on revenue, promote social stability and enhance the welfare of citizens.”
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