The Lagos Chamber of Commerce has said that manufacturing’s contribution to Gross Domestic Product may fall from 8.2% recorded in the third quarter of 2022 unless the government intervenes in the sector.
In its New Year’s statement on the economy signed by its Director General, Chinyere Almona, the chamber urged the government to save the industry from decline by offering financial support and improving the operating environment.
He stated that the factors that may continue to boost the main economic indicators are rising inflation, tight monetary policies, an unstable currency, a shortage of foreign exchange and the debt burden.
The chamber also noted that currency management, food supply disruptions, exchange rate volatility and election spending will also influence the economy in 2023.
According to the statement, the Central Bank of Nigeria, in response to the inflationary spiral, implemented a restrictive monetary policy, which increased the benchmark interest rate from 11.5% in January to 16.5% in November 2022.
The chamber projected that the CBN may revise the interest rate upwards during its Monetary Policy Committee meeting in January to 17 percent.
However, he asserted that interest rate adjustment alone would not control the rise in inflation, except if factors such as food supply disruptions, the high cost of energy, foreign exchange shortages and challenges of security around agricultural production sites, which triggered low production and high logistics. cost, are addressed.
The statement read in part: “The manufacturing sector suffered headwinds such as the shortage of foreign exchange for the importation of inputs; weakening of consumer demand due to weak purchasing power; high cost of energy; logistical challenges; political uncertainties; and a rigorous regulatory environment. Given that these factors will not persist in 2023, we are likely to see growth in the sector far from the negative growth of -1.9% recorded in the third quarter of 2022. With imports reduced due to foreign exchange shortages, the local manufacturing could accelerate its growth to meet the growing needs of unsatisfied local demand for previously imported finished products.
“However, this can only happen if we address issues like rising inflation; foreign exchange shortage; high cost of energy; high interest rates; and logistical challenge due to insecurity in most of the country.”
The chamber said that if the new administration removes the fuel subsidy, there would be some short-term impacts on the economy with the possibility of adjusting prices and demand in response to long-term market forces.
He urged the Federal Government to maintain its specific interventions in selected critical sectors such as agriculture; manufacturing; export infrastructure; address insecurity and free up more money from subsidy payments.
“With the Federal Government’s approved plan to restructure its Ways and Means loans of 23 trillion naira, Nigeria’s total debt effectively stood at 67.7 trillion naira by the end of 2022. Clearly, we need to look at the cost implications of our loans and expenses. the statement further said.
