The Lagos Chamber of Commerce and Industry has called on the Federal Government to tackle the country’s growing debt profile, accelerating inflation and foreign exchange illiquidity, which has been hampering economic growth.
At the press conference held in Lagos on Thursday, the LCCI President, Gabriel Idahosa, urged the government to adopt prudent fiscal policy measures and investment-friendly tax policies that work in tandem with the efforts of the central bank to tame inflation.
According to Idahosa, the inflationary pressure is primarily attributed to food and non-alcoholic beverages; housing, water, electricity, gas, among others.
Idahosa pointed out that increasing the monetary policy rate had proven to be insufficient in taming inflation, hence the need to strengthen support to critical sectors like agriculture, road infrastructure, power, and energy.
On Nigeria’s debt profile, the chamber noted that Nigeria’s debt was expected to increase to at least N95.2tn as of the end of December 2023.
The Debt Management Office puts Nigeria’s public debt at N87.91tn ($114.35bn) as of the end of September 2023.
Idahosa said, “With the approval of the National Assembly for the securitisation of the outstanding debit balance of N7.3tn owed by the Federal Government to the CBN, its inclusion has pushed the country’s public debt stock to at least N95.2tn.”
He added that the country’s high debt service-to-revenue ratio of 73.5 per cent made the debt situation unsustainable and growing fiscal concern,
He advised the government to explore other avenues to manage debt, including equity issuance opportunities and the sale of underutilised assets.
On the lingering exchange rate crisis, Idahosa noted that the exchange rate of the naira in the fourth quarter of 2023 depreciated in all segments of the foreign exchange market.
According to Idahosa, the depreciation reflected the huge FX obligations, sub-optimal crude oil production and declining capital importation.
He added, “This resulted in low foreign exchange earnings from crude oil and a decline in foreign capital inflows, thus exacerbating the demand pressure at the foreign exchange market.
“As a consequence, the exchange rate of the naira at the Nigerian foreign exchange market averaged 899.40/$ in December 2023, compared to 761.83/$ in September 2023. At the Bureau de Change segment, the naira depreciated to 1,214.52/$ in December 2023 from 962.33/$ in September.
“While BDC rate currently sells at an average of 1,290/$, the emerging gap between the official rate and the BDC rate may be attributed to several factors, including FX liquidity issues at the parallel market, increasing demand pressure, including huge FX obligations and interest rates below inflation.”
He advised the CBN to build market confidence around free FX pricing and explore more policies that grow more FX supply into the economy.
The CBN floated that country’s exchange rate in June, which caused the local currency to depreciate on the official and alternative forex market.