Debt, inflation, forex killing the economy, LCCI warns FG
The Lagos Chamber of Commerce and Industry has warned the Federal Government to find urgent solutions to the problems of Nigeria’s growing debt burden, inflationary pressure as well as worsening foreign exchange crisis in order to save the country. troubled economy.
The Speaker of the Chamber, Asiwaju Michael Olawale-Cole, said so in his remarks at the chamber’s quarterly economic outlook press conference held in Lagos on Tuesday.
Olawale-Cole said the combined forces of rising inflation, weakening growth, worsening supply chain disruptions due to the war in Ukraine and the fragile recovery from the Covid-19 lockdowns had all heightened worries about stagflation, deepening poverty and recession. .
He further noted that despite the 3.11% GDP growth predicted by the National Bureau of Statistics in the first quarter of 2022, the economy was still facing a wide range of issues which have exacerbated the standard of living of Nigerians.
He said, “Nigeria’s trade balance stood at a surplus of N1.2 billion in the first quarter of 2022. To maintain this trade surplus, we need more investment in export infrastructure. , improved and automated port operations, tackling high production costs, and stimulating the supply side of the foreign exchange market to improve liquidity and facilitate access to forex. We also need to diversify our exports by increasing our local refining capacity, petrochemical production and accelerating reforms in the oil and gas sector to attract more foreign investment in the coming months.
Regarding the worsening foreign exchange crisis which has posed serious problems for organized business, the chamber has proposed a unification of the foreign exchange market, a sentiment previously echoed by the President of the World Bank Group, David Malpass, during the spring meeting of the IMF and the World Bank.
“The naira experienced unprecedented volatility in the first quarter of 2022 with a widening premium between the official rate (at N415/USD) and the BDC/parallel market rate (of N615/USD). that monetary authorities should liberalize the foreign exchange market by unifying multiple exchange rates and ensuring that exchange rates are market determined.
“This is essential in the process of improving stability, liquidity and transparency in the foreign exchange market. The unification should improve our currency management framework given that multiple exchange rate systems have continued to create uncertainties and sources of arbitration.
Olawale-Cole, who also spoke on Nigeria’s worrying debt profile, warned that if the federal government continued on its current path, debt servicing would inevitably eat up almost all government revenue, making thus impossible any reasonable progress in the field of infrastructure development.
He added, “Nigeria’s debt service bill increased by 109% from N429 billion in the fourth quarter of 2021 to N896.56 billion in the first quarter of 2022. In the first quarter of 2021, Nigeria has spent N310.5 billion on domestic debt servicing, while it spent $286.35 million (118.9 billion) on external debt servicing, making a total of N429.4 billion naira. However, in the first quarter of 2022, it was 668.69 billion naira on domestic debt service and $548.79 million (227.87 billion naira) on external debt service, making a total of N896.56 billion.
“Borrowing is increasing dramatically and Nigeria is struggling to repay these debts due to revenue mobilization difficulties and the increasing burden of fuel subsidies.”