The Lagos Chamber of Commerce and Industry, LCCI, has warned that except drastic measures are taken Nigeria may likely experience economic recession by third quarter of the year.
The Chamber is particularly worried about the 6.1 per cent contraction in the Nigerian Economy.
Reacting to the report of the second quarter 2020 GDP report the Chamber said that In all, 46 sectors, 19 sectors contracted; 14 sectors are in recession, 11 sectors expanded, and two sectors reported slowdown in growth.
According to LCCI “the economy contracted by a record 6.1 per cent in the second quarter, and this marks the steepest quarterly contraction in Nigeria’s recent economic history.
The contraction in Q2-2020 also ended the three-year trend of marginal but positive growth era the Nigerian economy had after exiting recession in Q2-2017.
According to LCCI “The Nigerian economy is currently in dire straits. Apart from the urgent need for policymakers to reflate the economy, it is critically important for policymakers to also tackle the twin challenge of rising inflation and unemployment rates.
With inflation and unemployment at record high of 12.82 per cent and 27.1 per cent respectively. We note that the fiscal and monetary authorities have implemented several policies to mitigate the adverse impact of the covid-19 shock on the economy and business environment.
Noteworthy is the Nigerian Economic Sustainability Plan, which proposes a N2.3 trillion stimulus package, equivalent to 1.5 per cent of GDP. We acknowledge the commitment of government to support the economy and protect businesses. Although there has been a gradual reopening of the economy, we note that business and commercial activities remain subdued, evidenced by July PMI readings which shows business activities is still in the recessionary threshold.
“Given the protraction of the Covid-19 pandemic and lack of a vaccine, there is high possibility that the economy would contract, though marginally, in the third quarter and this would mark the second recession under the watch of the current administration. It is imperative to ensure effective synchronisation of fiscal and monetary policies and proper implementation of the sustainability plan among other measures.
The structural bottlenecks to productivity in the economy needs to be urgently removed through a mix of fiscal, monetary and regulatory measures. It is imperative to reduce policy uncertainties in order to inspire the confidence of investors, both domestic and foreign. This would give the economy a boost in the near term. However, growth will continue to remain weak and fragile till the first quarter of 2021”.
“The 6.1 per cent contraction is not a surprise as the number reflects the profound impact of the covid-19 pandemic on the Nigerian economy.
The containment measures including lockdown, national curfews, inter-state travel bans, closure of schools, airlines, businesses imposed globally and domestically to slow the spread of the pandemic, significantly disrupted global supply chains and destabilised commercial, business, investment, and trade activities.
In addition to these, it was also in the second quarter that the country was confronted with weakening oil prices, low crude production, huge volume of unsold crude cargoes, foreign exchange scarcity, depleting external reserves, portfolio outflows in the financial markets, disruption & adjustment of the 2020 budget, revenue collapse from oil and non-oil sources, rising spate of job losses, high food prices, among others.
We note the weak performance of the economy at sectoral level, particularly among critical sectors with potentials to facilitate economic diversification. While some sectors did expand in the second quarter, most of the sectors that reported positive growth in the first quarter plunged into sharp contraction while others maintained their position in recessionary territory.