LCCI 64TH INDEPENDENCE ANNIVERSARY STATEMENT 2024
NIGERIA AT 64: THE FIGHT TO STABILIZE THE ECONOMY
On this remarkable October 1st, we celebrate 64 years of independence for our beloved nation, Nigeria. Today, we commemorate our freedom and reflect on our journey as a nation to where we find ourselves in the current state of our economy — the transitions, our triumphs, challenges, failures, and the path to our future. The Chamber is, however, delighted to join all Nigerians to celebrate the October 1st spirit as we mark our nation’s 64th anniversary. This speech balances the recognition of Nigeria’s historical achievements with an honest appraisal of the present economic challenges while offering constructive recommendations for the way forward.
Since gaining independence in 1960, Nigeria’s economy has undergone significant transformations. We transitioned from an economy largely dependent on agriculture to one driven by the discovery of oil in the 1970s, and 64 years later, we are yet to explore the full benefits a nation should derive from oil. The revenues from oil have shaped the size of our federal budgets for so many years. The oil sector has undoubtedly defined our economic landscape, financed our industrialization, and hugely supported other sectors. It gave us the resources to build infrastructure, invest in education, and position Nigeria as a key player in global energy markets.
The diversification of our economy has been a topic of focus for a long time, and our continued dependence on oil revenues questions our claim of being a diversified economy. We must diversify our revenue by developing other sectors like solid minerals, gas, and agriculture to reduce our dependence on oil revenues.
After independence, Nigeria witnessed a rebirth in 1999, twenty-five years ago, with the return to democratic administration after a protracted military rule. The Nigerian nation has survived threats of a civil war recurrence and has remained a united nation with the hope of a return to greater glory. The 25 years of uninterrupted democracy in Nigeria has earned the country enormous goodwill as one of the few stable democracies in Africa. We must, however, strengthen our democratic roots in the face of emerging challenges that pose risks to democracy in Nigeria. A situation where democratic leadership is now more determined by the courts and tribunals instead of citizens’ votes is a threat to weaken the power of the ballot.
The Chamber wishes to highlight that core democratic values and ideals need to be given more state attention to have firmer roots, especially in the following respects:
- Transparency in the management of public finance
- Rule of law
- Separation of powers and the inherent checks and balances.
- Quality and independence of democratic institutions – Electoral bodies, Law Enforcement Agencies, Judiciary, etc
- Citizen engagement in the democratic process.
- The practice of true Federalism
The LCCI recognizes that Nigerian democracy is still a work in progress. However, as in many advanced democracies, it is crucial to recognize the importance of these democratic ideals to sustain our democracy and ensure the advancement of the common good for all citizens. And very recently, a mixed colouration of insecurity, border clashes, herdsmen/farmers clashes, secessionist clamourings, banditry, kidnapping, and social unrest have all emerged as critical threats to our national life.
ECONOMIC PERFORMANCE
The economic growth trend, measured by the Gross Domestic Product (GDP) performance, has been generally positive over the last decade, except for recent challenges posed by the COVID-19 pandemic and, more recently, debt crises, unbearable interest rates, the burdening effect of consistently high inflation risks, insecurity, and FOREX illiquidity. There is an urgent need to address the weak purchasing power of consumers who have been impoverished because of high inflation rates. The exit of some multinationals and the resultant job losses may begin to shrink our production levels, which may drag economic growth in the coming months.
The Gross Domestic Product (GDP) grew in 2024 Q2 by 3.19% year-on-year in real terms, making it the fifteenth quarter of growth. The oil sector grew by 10.15% in Q2 2024, making it the third quarters of significant growth since the last quarter of 2023. However, oil production remains suboptimal due to insecurity and oil theft. To address these issues, the government must proactively address the recent challenges bedeviling the oil and gas sector.
The non-oil sector grew by 2.80% in the second quarter, the same as the growth in the first quarter. Regarding activities, the non-oil sector accounted for 94.30% of the total GDP in Q2 2024. We urge the government to continue with the non-oil campaigns and interventions to sustain the targeted financing for boosting non-oil exports for enhanced and diversified foreign exchange earnings.
The growth of 1.41% recorded for agriculture, 1.28% for manufacturing, and 0.70% for trade are comparatively low compared to other sectors that grew above 4%. This also indicates the threats facing these sectors that power Nigeria’s real sector. The woes in these two sectors are responsible for the frightening rise in our inflation rate. Real sector activities may be constrained in the coming months with the excruciating burden of worsening insecurity, exchange rate volatility, high interest rates, and rising debt service.
The quality of the business environment remains a source of concern to investors, especially in the real sector. Weak infrastructure, uncertain policy environment, and institutions have continued to adversely affect many economic enterprises’ efficiency, productivity, and competitiveness. These conditions pose a significant risk to job creation and economic inclusion across sectors.
The Federal Government needs to sustain its targeted interventions in selected critical sectors like agriculture, manufacturing, and export infrastructure, tackling insecurity and freeing more money from subsidy payments. We urge the government to tackle oil theft to earn more foreign exchange, borrow from cheaper sources to reduce the burden of debt servicing and take a decisive step towards removing fuel subsidies.
Beyond achieving economic growth, the government must redesign the models of running our healthcare service delivery and education in order to improve our Human Development Index (HDI). We recommend a model that allocates more funding for the education and healthcare sectors. At the same time, the private sector operators need a well-regulated business environment that allows only the best quality providers to operate in these sectors.
CHALLENGES FOR THE BUSINESS ENVIRONMENT
Weak Power Supply and the Switch to Renewables.
Poor power supply remains a significant burden on businesses. It is one area in which the trend since independence has been that of progressive decline. We urge the government to sustain the reforms in the power sector until when we start to see a noticeable improvement in power supply. The idea of allowing states to drive power supply management is commendable and should be well implemented to achieve desired results. With the frequent collapses recorded by the national grid, certainly, we can no longer rely on a centralized power source. The way to go is renewable energy and decentralizing the national grid. We urge the government to create an environment that attracts manufacturers of solar panels to drive the massive adoption of renewable energy in Nigeria.
Insecurity
In the last decade, the security situation in the country deteriorated, assuming a very worrisome dimension. This has impacted investment inflow and worsened the country’s perception and image by the global investing community. Today, insecurity is a critical factor driving an unbearable inflation rate in Nigeria. Agricultural production bases have been negatively impacted, leading to food scarcity and rising food inflation.
Policy Inconsistencies Creating Uncertainties
A critical factor that has made our business environment tense is the level of uncertainties that bedevil the regulatory environment. There are too many changes to policies on taxes, import restrictions, foreign exchange market operations, etc. Policy inconsistencies create uncertainties in the business environment. Unfortunately, businesses still suffer from such uncertainties.
High Cost of Credit and Low Consumer Demand
A significant factor attributed to the recent exit of multinationals is the low consumer demand for their products, especially in the fast-moving consumer goods sector. With elevated inflation rates, job losses, and increasing poverty levels, consumer purchasing power has been badly weakened. In that process, these consumers switch to cheaper, less quality substitutes from competitors, shrinking the multinationals’ market shares.
At this time of high inflation, unbearably high interest rates, and weakened Naira against the Dollars, a reprieve to companies in Nigeria may not be near yet without targeted government intervention.
RECOMMENDATIONS FOR WAY FORWARD
As we reflect on our journey and current challenges, bold and innovative actions are needed to steer Nigeria toward macroeconomic stability, sustainable growth, and shared prosperity. Below are a few recommendations reflecting the perspectives of the private sector:
1. Revenue Diversification: It is imperative that we move away from our overreliance on oil revenue. While we agree that the Nigerian economy is well diversified along the line of economic activities, on revenue, we still derive more than 60 percent of our revenue from oil. We need more drive in our non-oil sector development. We must prioritize more investments in food and livestock production, transport infrastructure to improve logistics and introduce and sustain fiscal concessions like tax reliefs and import duty waivers, all targeted at subsidizing production. In the services sector, we should strengthen sectors such as technology, creatives and entertainment, renewable energy, and tourism. These sectors hold great potential to create jobs and generate revenue.
2. Infrastructure Development: To foster economic growth, we must invest in critical infrastructure, especially power, transportation, and healthcare. Public-private partnerships will be vital to addressing our infrastructure deficits, and we call on the government to create a more enabling environment for such collaborations. We urge the government to remain faithful to using borrowed funds from international development institutions like the World Bank and the International Monetary Fund (IMF) on infrastructure as agreed.
3. Fiscal Discipline and Innovative Debt Management: We must address the issue of fiscal mismanagement and ensure that debt is used prudently to finance projects that will generate long-term value. Additionally, the government must broaden the tax base, improve revenue collection, and reduce inefficiencies in public spending. The cost of governance is high and unsustainable, there are many leakages fueling corruption, and taxpayers are demanding more prudence and transparency in the use of tax revenues. Public debt stood at N11.24 trillion in 2014, rising to N121.7 trillion as of March 2024, according to data from the Debt Office of the Federation.
4. Align Monetary Policies with Economic Growth Drive: The 2024 Federal Budget projects a growth rate of 3.7% for the Nigerian economy. Since January, the inflation rate has been on an upward swing, reaching 32.15% as of August, and at the same time, interest rates have become unbearable for businesses. Looking at the last 10 years, the average inflation rate rose from an average of 8% in 2014, rising astronomically to above a 30% level recorded in most parts of 2024. The CBN’s average Monetary Policy Rate was 13% in 2014 compared to the levels above the 20% mark, with consecutive increments within the last 18 months. The rate of borrowing has risen to 27.25% as of September 2024. While we agree that price stability is crucial to economic stability, we, the economic management team, must remain focused on achieving the target growth levels in order to create much-needed jobs and boost government revenue.
5. Human Capital Development: Our youth are our greatest asset, and we must equip them with the skills they need to thrive in a rapidly changing global economy. This means improving our education system, expanding vocational training, and investing in digital skills. Nigeria’s unemployment rate increased to 5.3% in the first quarter of 2024 from 5.0% in Q3 2023. The youth unemployment rate also rose to 8.4%, and the percentage of Youth Not in Education, Employment, or Training (NEET Rate) was 14.4%. Indicating a 0.7 percentage point increase from Q3 2023, according to the latest statistics from the National Bureau of Statistics (NBS). Empowering our young people will ensure they can contribute meaningfully to national development. Empowering our young people will ensure they can contribute meaningfully to national development.
6. Security Architecture and Financing: There can be no meaningful economic progress without security. The government must intensify efforts to restore peace and stability across the country. We must ensure that the Armed Forces are better funded to undertake the daunting task of curtailing the many ills in our society due to the dire state of the economy. This will foster an environment where businesses can thrive and investments can flow.
7. Fostering Small Business and Entrepreneurship Support: We have all acknowledged that small businesses account for more than 70% of job creation and a massive contribution to non-oil sector activities in Nigeria. We must, therefore, continue to support the entrepreneurial ecosystem in Nigeria. Policies that encourage innovation, reduce barriers to entry for small and medium-sized enterprises, and promote ease of doing business will be critical in driving economic growth.
CONCLUSION
We stand at a crossroads as we mark Nigeria’s 64th year of independence. We can either choose to continue on the current path or rise to the occasion to make the difficult decisions and build an inclusive, prosperous, and sustainable future for all Nigerians.
The Lagos Chamber of Commerce and Industry remains committed to advocating for policies that will drive economic growth, create jobs, and improve the quality of life for all citizens. Together, as a people, we can overcome our challenges and realize the full potential of this great nation.
Let us all recommit to the vision of a prosperous Nigeria that offers hope and opportunity for generations to come.
Our nation, Nigeria, has come a long way and is too big to fail.
The Chamber wishes the government and people of Nigeria a happy 64th Independence anniversary celebration.
MR. GABRIEL IDAHOSA, FCA
PRESIDENT & CHAIRMAN OF COUNCIL
LAGOS CHAMBER OF COMMERCE AND INDUSTRY
1ST OCTOBER 2024
