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The Lagos Chamber of Commerce has said that the contribution of manufacturing to the Gross Domestic Product may fall from the 8.2% recorded in the third quarter of 2022 unless the government intervenes in the sector.
In its New Year statement on the economy signed by its Director-General, Chinyere Almona, the chamber called on the government to save manufacturing from decline by offering it financial support and improving the operating environment.
It stated that factors that may continue to drive the major economic indicators are rising inflation, tight monetary policies, an unstable currency, foreign exchange scarcity and debt burden.
The chamber also noted that currency management, food supply disruptions, exchange rate volatility, and election spending would also influence the economy in 2023.
According to the statement, the Central Bank of Nigeria, in response to the spiralling inflation, deployed a tightening monetary policy, which increased the benchmark interest rate from 11.5 per cent in January to 16.5% in November 2022.
The chamber projected that the CBN may further review the interest rate upward during its Monetary Policy Committee meeting in January to 17 per cent.
It, however, claimed that interest rate adjustment alone would not tame the rising inflation, except if factors such as food supply disruptions, high energy cost, scarcity of forex, and the security challenges around agricultural production locations, which triggered low production and high logistics cost, are addressed.
The statement read in part, “The manufacturing sector suffered from headwinds such as scarcity of forex for import of inputs; weakened consumer demand due to weak purchasing power; high energy cost; logistical challenges; policy uncertainties; and harsh regulatory environment. With these factors not persisting into 2023, we may likely record growth in the sector away from the negative growth of -1.9 per cent as of Q3 of 2022. With lowering imports due to forex scarcity, local manufacturing could rev up in growth to meet the growing unmet local demand for hitherto imported finished products.
“However, this can only happen if we address issues like rising inflation; scarcity of forex; high energy cost; high-interest rates; and logistics challenge due to insecurity in most parts of the country.”
The chamber said if the new administration removes fuel subsidy, there would be some shocks to the economy in the short term with the possibility of adjusted pricing and demand in response to market forces in the long run.
It urged the Federal Government to sustain its targeted interventions in selected critical sectors such as agriculture; manufacturing; export infrastructure; tackling insecurity and freeing more money from subsidy payments.
“With the approved plan of the Federal Government to restructure its Ways and Means loans of N23 trillion, Nigeria’s total debt stood effectively at N67.7 trillion by end of 2022. Clearly, we must watch the cost implications of our borrowing and spending,” the statement further stated.
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