The Lagos Chamber of Commerce and Industry has said that the removal of fuel subsidy and unification of exchange rates in the country negatively impacted the growth of businesses in the first half of the year.
The President of the LCCI, Michael Olawale-Cole, represented by his deputy, Gabriel Idahosa stated this during the half-year economic review organised by the chamber in Lagos recently.
According to Olawale-Cole, the Nigerian economy in the first half of 2023 was quite challenging due to a multiplicity of factors.
He said, “Business conditions and operating environment in the first half of the year were largely difficult due to rising interest rates, inflationary pressures, foreign exchange volatility and the liberalisation of the downstream sector of the oil and gas industry.”
Some of Nigeria’s top economists, who also spoke at the event, said that the Federal Government’s recent economic reforms, premised on removing fuel subsidy and floating the naira to unify foreign exchange rates were hurting Nigerians because they were not properly executed.
In his keynote presentation, the Chief Executive Officer of Economic Associates, Dr Ayo Teriba, noted that the new administration did not disclose the economic situation it inherited from the previous administration.
He also faulted the government for not embarking on widespread consultation before removing fuel subsidy.
According to him, consulting with key stakeholders would have helped the government mitigate the risks and pains that have followed recent economic reforms.
Teriba lamented that Nigerians had to suffer the consequences of the recent economic reforms, adding that the government did not properly debate how to remove fuel subsidies and unify forex rates in a way that would not have devastating consequences for the economy.
Teriba said, “If we look at the economy as a patient, and look at the new government as a medical crew, it is important that they start with a diagnosis. Now that the regime has come in, it will help for them to release information that is purely diagnostic so we can have a focused conversation on how to solve the problems.
“Since the regime came in, right from the inauguration, the president told us that subsidy was gone. Two weeks later, we unified the exchange rate. I think that those prescriptions were made without any rigorous diagnosis.’’
The president would not have been aware of the situation in the downstream sector at the inauguration ground.
“So, no preparations were made to deal with the fallouts that have come. When you do surgery, however minor, you need to assess what that surgery may entail. If you want to pull out a tooth, you need to consider — do I need some painkillers to administer as I pull out the tooth?”
Speaking further, Teriba said that allowing Nigerian National Petroleum Company Limited to have a monopoly of the petroleum industry was not promoting the form of competition that would occasion fair prices of petroleum products.
He added that the President needed to do a thorough reorganisation of the Central Bank of Nigeria.
According to him, beyond policy reforms, to truly turn around the economy, the government must carry out institutional reforms in the apex bank and the NNPCL.
“FG should have shored up forex reserves before floating the currency,” he added.
Teriba also criticised the hike in the Monetary Policy Rate and Cash Reserve Ratio, describing it as strangleholds on consumers who need liquidity.
He advised the government should raise revenue through equity financing as opposed to frequent borrowing and fundraising through traditional debt instruments such as bonds.
In the same vein, the Chief Executive Officer of ThinkBusiness Africa, Ogho Okiti, emphasised the need for institutional reforms to revamp the economy.
He added that the expectation of the President’s economic reforms was not properly communicated to Nigerians.
Forecasting the prospects of the Nigerian economy in the coming months, Okiti said economic growth would slow down in the third quarter and fourth quarters
He projected that inflation would cross 25 per cent by the end of the year.
On her part, the Chief Economist at Coronation Merchant Bank, Chinwe Egwim, said year-end inflation would hit 27 per cent while GDP growth would remain at three per cent.
She noted that using rate hikes to curb inflation should be a data-based decision as against general economic rubrics employed by the CBN.
The Managing Director and Chief Economist at Analysts Data Services and Resources, Afolabi Olowookere, said the exchange rate convergence plan of the Federal Government did not pan out as expected.
He said economic growth would remain weak due to a lack of productivity in the economic landscape of the country.
