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Worsening Security Challenges: LCCI Recommends Possible Solutions To Curb Further Deadly Attacks

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ASIWAJU (DR) MICHAEL OLAWALE COLE, CON PRESIDENT, LAGOS CHAMBER OF COMMERCE & INDUSTRY (LCCI).

…Curbing the current insecurity crisis because of its impact on businesses and the economy

Olushola Okunlade Writes

The worsening insecurity profile in Nigeria is reaching a worrisome dimension with the unfortunate incident on Monday 28th March 2022, when some gunmen launched a deadly attack on a Nigerian Railway Corporation (NRC) Abuja-Kaduna evening train carrying an estimated 398 passengers.

After the attack, reports confirmed that eight people were killed, and twenty-two people are still missing. Earlier, on 26th March 2022, the Kaduna Airport was attacked, leaving one dead and many maimed.

This is is rather frightening and increasingly threatening to the well-being of Nigerians.  

Through the business community, the Lagos Chamber of Commerce and Industry is concerned with the current insecurity crisis because of its impact on businesses and the economy. We are also very concerned because of the apparent threat to our forthcoming general elections in 2023 and, by extension, a threat to our democracy.

In the absence of peace and security, it would be challenging to hold credible, free, and fair elections that would reflect the choices of the electorates about whom their leaders should be.

The 2021 Global Peace Index published by the Institute for Peace and Economics ranked Nigeria at 146 out of 163 countries, only better than countries like Iraq, Syria, Libya, Afghanistan, Sudan, Somalia, Yemen, and Russia, which are typically known to have been conflicting areas for a long time. The security challenges are continuing to spiral into general lawlessness and anarchy. Also, the Global Conflict Tracker hosted by the United States Council on Foreign Relations recorded that attacks by bandits across the North-West have claimed at least 5,000 lives since 2018. Since 2009, nearly 350,000 people have been killed in the North-Eastern part of the country due largely to the activities of Boko Haram Islamist insurgents. The number of displaced people in the Lake Chad Basin is about three million.   

ASIWAJU (DR) MICHAEL OLAWALE COLE, CON PRESIDENT, LAGOS CHAMBER OF COMMERCE & INDUSTRY (LCCI).
ASIWAJU (DR) MICHAEL OLAWALE COLE, CON PRESIDENT, LAGOS CHAMBER OF COMMERCE & INDUSTRY (LCCI).

Insecurity in Nigeria is multidimensional and pervasive, ranging from armed banditry, kidnapping, attacks on state infrastructure, perennial herder-farmer clashes to gang violence, attacks on police stations, prisons, airports, and power transformers, intercommunal violence, ritual killings, mob justice, and casual intimidation of ordinary citizens by the law enforcement agents. In the South-South region, we have an economic war as the Government struggles to maintain the peace required to achieve optimal crude oil exploration for FOREX earnings. Nigeria earns about 80% of its foreign exchange earnings from the Oil and Gas Sector. There are political agitations in the South-East, secessionist agitations in the South-West. Today, we have terrorism, banditry, and kidnapping in the Northern part that have taken frightening dimensions and colorations.

In the face of these challenges, the Lagos Chamber wishes to make the following recommendations:

  1. Nigeria needs a surveillance infrastructure that is monitored in real-time to respond to emergencies and foil planned crimes. This calls for more technology deployment to gather intelligence, provide 24/7 responsive surveillance, and track persons’ movements and activities, especially in already troubled areas.
  • Youth unemployment is a critical factor fuelling insecurity in Nigeria. The latest data from the National Bureau of Statistics show that youth unemployment is at 42.5% and youth underemployment at 21%. This is a driving factor for the insecurity crises in Nigeria. We need more jobs to engage our youths productively.
  • We must tackle gun control crises where unauthorized and unidentified people possess firearms without strict control. It is estimated that more than six million small arms are in the hands of civilian nonstate actors.
  • Drug abuse by our youth must be curtailed, and drug traffickers adequately prosecuted and punished as a deterrent. The United Nations Office on Drug and Crimes (UNODC) in 2021 revealed that about 14.4% of Nigerians were engaged in drug abuse. This portends a negative trend for the country’s future when we estimate the connection between drug abuse and violence.
  • The huge amount of N2.41 trillion earmarked for the defense and security sector in the 2022 Federal Government budget may have reflected Government’s commitment to resolving security challenges. We however need to be prudent with spending and put in place checks to prevent the diversion of funds to other uses like sponsoring political activities. In 2019, Nigeria had the third-largest military budget in Africa, behind only South Africa and Algeria. At the state and local government (LG) levels, governors and local government chairpersons have severally been accused of regularly mismanaging “security votes,” a monthly federal allocation towards security-related expenses within the states. There is a need for better accountability in the disbursement of these funds for suitable projects.

For immediate action, we recommend that the President, Commander-In-Chief of the Armed Forces, Federal Republic of Nigeria, President Muhammadu Buhari, GCFR, should convene a National Council of State Meeting to deliberate on the several issues around politics, the economy, insecurity, and the forthcoming general elections. We also call on the Federal and State Governments to expedite actions to restore peace, law, and order in the country before the full-scale launch of political campaigns for the 2023 general elections. If we do not commit to a new order and more enabled and innovative security architecture, soon, security will suffer a heavier blow once politics takes center stage in governance. The major challenge waiting for the incoming Nigerian president (likely a civilian) will be to resolve the security crises. Still, first, we must restore and preserve law and order in Nigeria today for us to be able to hold the elections next year. The majority of Nigerians still have confidence in President Muhammadu Buhari, GCFR being an accomplished and retired Army General to be well equipped to tackle Nigeria’s daunting security challenges.

Economy

LCCI Applauds Nigeria’s Economic Growth Performance

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This action also has implications for economic growth, job creation, and revenue generation for the government

…Highlight some threats to future growth that need special attention

Olushola Okunlade Writes

The Nigerian economy has recorded an impressive recovery from the recession induced by the COVID-19 pandemic in 2020.

The economy has consistently recorded growth rates breaking many analysts’ predictions of expected lower growth rates. However, the economy has continued to struggle with many inhibiting burdens like inflation, weak revenue generation, degenerated infrastructure, forex challenges, unsustainable cost profile seen in debt services and subsidy payments, and the daunting threats of worsening insecurity.

LCCI is concerned that if we continue in this trajectory, the economy may bleed away into stagflation which will impact production costs, job losses, worsened forex crisis, and dampened growth in the medium term.

The National Bureau of Statistics (NBS) announced that Nigeria’s Gross Domestic Product (GDP) grew in 2022Q2 by 3.54% year-on-year in real terms. This is the seventh quarter of positive growth. This rate is lower than the 2021Q2 rate which was at 5.01% decreasing by 1.47%. Quarter-on-Quarter, it was an increase of 0.44% points relative to 3.11% recorded in 2022Q1.

While we celebrate the latest growth figures, the Chamber wishes to highlight some threats to future growth that need special attention:

The oil sector has consistently recorded negative growth for the ninth consecutive quarter, contracting again by -11.8% y/y in Q2 2022 following a higher contraction of -26% y/y in Q1. The average daily crude oil production in Q2 was 1.43mbpd even lower than the 1.49mbpd produced in Q1. If oil revenue makes up more than 80 percent of government revenue, we expect the Government to tackle the menace of oil theft and pipeline vandalism with a sterner approach. 

The non-oil sector grew by 4.8% y/y in Q2 ’22 against 6.1% y/y in Q1 ‘22. Key drivers within the non-oil economy include transportation and storage (51.7% y/y), finance and insurance (18.5% y/y), telecommunications (7.7% y/y), trade (4.5% y/y), real estate (4.4% y/y), construction (4.0% y/y), manufacturing (3% y/y), and agriculture (1.2% y/y). Combined, these sectors account for 78.3% of the total GDP in Q2. We urge the government to continue with the non-oil campaigns and interventions to sustain the targeted financing towards boosting non-oil export for enhanced foreign exchange earnings.

The growth of 1.2% recorded for agriculture and 3% for manufacturing are comparatively low when compared with other sectors that grew above 5%. This is also indicative of 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. And with the excruciating burden of debt service, subsidy payments, and worsening insecurity, many more production activities may be constrained in the coming months. 

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. It is also worrisome that the 2023 budget estimations indicate that there may not be any significant allocation to capital projects in 2023. 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 toward removing fuel subsidies.

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Economy

Economy: Dangote Petrochemical Plant To Position Nigeria As Polypropylene Hub In Africa

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Economy: Dangote Petrochemical Plant To Position Nigeria As Polypropylene Hub In Africa

…As Godwin Emefiele commends the effort, says timely and appropriate

Olushola Okunlade Writes

The Dangote’s $2 billion Petrochemical Plant located in Lagos when fully operational will position Nigeria as one of Africa’s largest petrochemicals hubs and boost non-oil export earnings for the country, according to the Dangote Group President, Aliko Dangote.

The 900,000 metric tons per annum capacity Plant, which is being built alongside the 650,000 barrels per day Dangote Petroleum Refinery will produce polypropylene strategically positioned to cater to the demands of the growing plastic processing downstream industries not only in Africa but also in other parts of the world.

Dangote who made this disclosure at the 2022 Zenith Bank International Trade Seminar on Non-oil Export recently in Lagos, said the refinery and petrochemical projects will ensure petroleum products’ sufficiency and security for Nigeria.

He emphasized the need for government to unlock the potential of petrochemical export by completing the OB3 pipeline to make gas available to manufacturers. “There is a need to prioritize financing gas infrastructure, gas allocation to the domestic market, and adjustment of fiscal framework to make the supply of gas to domestic market attractive for oil companies,” he added.

Dangote disclosed that the refinery reputed to be the largest single train greenfield petroleum refinery in the world is at an advanced stage of completion and that on completion, it is expected to export much more than 8 million tons of Petroleum products annually after meeting domestic consumption, while about 900,000 tons of polypropylene is also expected from the petrochemical plant.

The business mogul revealed that the recently commissioned 3m mtpa Fertilizer Plant has “commenced export to India, North America, and Latin America. At steady state, will export two million tons per annum after meeting domestic consumption.”

He explained that the Dangote Fertiliser regarded as the second largest urea fertilizer plant in the world is leveraging Nigeria’s abundant gas reserves as raw material for the production of Urea.

Stressing the need for Nigeria to encourage non-oil export, Dangote said that Nigeria’s non-oil export is quite low compared to other African top oil producers. “This exposes the economy to oil price and production risks. Export opportunities abound in Nigeria but there are two main routes import substitution and export-oriented industries. Import substitution is ideal for economies like Nigeria which has a large domestic market and a huge import bill”, he added.

Dangote said that investors can build industries, which initially target the domestic market, then subsequently target export markets as they build scale and competitiveness.

He then urged the Federal Government to build on the country’s competitive advantage to develop industries that are primarily geared toward export. “Nigeria LNG Limited (NLNG) in Bonny is a good example of an export-oriented investment (though would be good to get a model where such revenues are sold in the I&E window”, adding that some countries have gone a step further to create special economic zones to achieve this objective.

In his goodwill message, the Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele described the theme of the seminar “Unlocking Opportunities in Nigeria’s Non-Oil Export Business” as timely and appropriate.

The CBN Chief reasoned that the theme was apt because “the global economy and structure are changing rapidly before our eyes. The previous world economic order underpinned by globalization and seamless trade possibilities seems to be suffering major disruptions lately. We believe Nigeria has a lot of potential, and we can harness this for the good of our people and country.”

He pointed out that the CBN had undertaken several initiatives to promote the non-oil export sector because of its firm belief that the non-oil export sector holds enormous potential to contribute to employment generation, wealth creation, and economic growth of the country.

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Business

CBN Interest Rates Mean Less Credit To Private Sector, Reduced Investment, And Constrained Production In Economy – LCCI

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This action also has implications for economic growth, job creation, and revenue generation for the government

…CBN action has implications for economic growth, job creation, and revenue generation for the government – LCCI

Olushola Okunlade Writes

LCCI Statement on Monetary Policy Rate Hike by the Central Bank of Nigeria (CBN)

The Lagos Chamber of Commerce and Industry (LCCI) has stated that the recent hike in Monetary Policy Rate (MPR) by the Monetary Policy Committee of the Central Bank of Nigeria (CBN) from 11.5% to 13% was well expected by the Lagos Chamber following the recent fundamentals in the economy.

LCCI has also noted the trend around the rising inflation rates across many economies globally. It is well understood that the hike was meant to control the rising inflation rate feared to assume a galloping trend soon.

“The CBN has always maintained that Nigeria’s high inflation rate was due to non-monetary factors outside its purview. We have consistently pointed at factors responsible for the rising inflation including an epileptic supply of Premium Motor Spirit (PMS), high cost of Automotive Gas Oil (AGO/Diesel), electricity tariff hikes, insecurity, and the illiquidity crisis in the foreign exchange market. These factors have continued to put pressure on the cost of production translating to higher prices or cost-push inflation. These headwinds must be tackled head-on for the inflationary pressure to be tamed sustainably.”

LCCI stated that the hike in the interest rates will normally mean less credit to the private sector and that can translate to reduced investment and constrained production in the economy, at least in the short term. This action also has implications for economic growth, job creation, and revenue generation for the government. When the MPR was 11.5% some credit lenders charged as high as 25%  maximum rate to small companies. With the benchmark interest rate at 13%, we may likely have rates climb beyond 30% for SMEs.

While we agree with the proposition that a lower interest rate in Nigeria compared with higher rates in developed economies would lead to capital flight, we must restate our recommendation that interest rate hikes will not on their curb inflationary pressures.  The supply-side challenges like insecurity, forex scarcity, and uncertainties from the inconsistent policy environment must be tackled to curb the rising inflation. This is the more sustainable solution to the rising inflation in Nigeria.

In the coming months and into the third quarter, the CBN should expand its targeted intervention schemes to support the productive sectors of the economy to reduce the cost of production. Beyond the role of price stability, the CBN must pay attention to sustaining economic growth that can create jobs and boost government revenues. Again, we reiterate that hikes in rates alone will not tackle the near-galloping inflation trend in Nigeria. We need interventions to boost the supply of goods and services, build critical supportive infrastructure, and resolve the illiquidity crisis in the forex market.

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