By Anthony Isaac
The Lagos Chamber of Commerce and Industry (LCCI) has projected that the Nigerian economic growth would remain subdued at two percent in 2020 because of weak consumer demand and low private sector investment.
The chamber in its 2019 Economic Review and Outlook for 2020 said the high cost of doing business in the country would also remain due to poor infrastructure, multiple taxation and inflation.
LCCI Director-General, Dr Muda Yusuf, in the Outlook report made available to journalists in Lagos, Thursday, explained that while Nigeria may have recorded improvement on the Ease of Doing Business Ranking due to some recent policy measures, realities on ground would continue to differ if the highlighted challenges were not properly addressed.
According to him, the performance of the trade sector in 2020 would be shaped by the direction of government policies, pointing out that the manufacturing sector would continue to benefit from the Central Bank of Nigeria’s aggressive credit push.
He predicted that competition between foreign and local producers would fade on prolonged closure of land borders.
Yusuf disclosed that headline inflation was expected to trend higher in 2020 which would be driven by implementation of new minimum wage and continued closure of the land border.
Yusuf said that higher Value Added Tax rate of 7.5 per cent and the early disbursement of funds for budget implementation following the return of the budget cycle would also be contributory factors.
“We expect economic growth to remain subdued at around 2 per cent by 2020 as consumer demand, as well as private sector investment, will most likely remain weak.
“We are of the view that failure by government to fix structural constraints with regards to fixing power challenges and rehabilitating deplorable road networks, will perpetuate the poor productivity and performance of the sector.
“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.
“As a sustainable solution, it is imperative to fix the fundamental issues of high cost of domestic production, the prohibitive cost of cargo clearing at the Lagos ports, prohibitive import tariffs, high cost of logistics within the economy, and border policy capacity,” he said.
On the performance of the agricultural sector, the Director-General projected improved credit flow to agriculture on the back of proposed increase in deposit money banks’ loan to deposit ratio to 70 per cent.
However, from policy perspective, Yusuf expressed the view that prolonging closure of the land borders would further add impetus to agricultural output in 2020.
“The monetary value of agriculture output has been on the upward trajectory, rising 40 per cent quarter-on-quarter to N5.41 trillion between July and September from N3.86 trillion between April and June, compared with N3.60 trillion in the first quarter.
“The CBN like it did in 2019, will maintain status quo by not relenting in supporting the sector with much-needed funds in ensuring that the wide gap between local demand for food and supply is bridged.
“However, risk factors to our prognosis include security challenges in the North-east zone; a major food producing region in the country, resurgence in herders-farmers clash in the North-central region.
“Overall, we expect the sector to sustain its upward growth trajectory in 2020,” he stated.