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LCCI predicts galloping inflation, slow economy in 2021

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The Lagos Chamber of Commerce and Industry (LCCI) has warned that 2021 economic outlook may not be  bright as cost of living may rise due to higher inflation rate.

It specifically states that headline inflation will remain elevated as the combination of food supply shocks, forex policies, higher energy costs, forex illiquidity, heightened insecurity in major food-producing states will continue to mount pressure on domestic consumer prices.

In its Economic and Business Review for Year 2020 And Outlook for Year 2021 released on Sunday, the LCCI said it remained unclear what new strategies were in the works for the nation’s security situation.

The report released by the LCCI’s Director General, Dr. Muda Yusuf, noted that shortageof foreign exchange to businesses and end-users would remain a major economic issue in 2021.

According to the report, while forex supply will face continued pressure in 2021 in the light of relatively lower dollar inflows from oil, foreign investment, and diaspora remittances, the Central Bank of Nigeria (CBN) is expected to sustain its demand management strategies via rationing and restricting access to forex for food imports.

“In year 2021, the CBN will most likely maintain and initiate more demand management policy measures to taper growing demand for forex amid weak dollar inflows,” it said.

The LCCI said without bold policy pronouncements, constraints to the ease of doing business including foreign exchange shortage, escalating production costs, high regulatory costs, infrastructure inadequacies, and delayed cargo clearance, will persist into year 2021.

The report said the Nigerian policy environment is characterized by a great deal of uncertainty. The inconsistent and unpredictable nature of the policy and regulatory environment continues to hurt long-term investment planning and business projections.

Yusuf said, “These constraints will be more profound on businesses in the real economy. We believe the sluggish pace of recovery will continue to subdue consumer demand, albeit the impact on earnings performance will be disproportionate across sectors.”

He also said many Micro Small and Medium Enterprises (MSMEs) would struggle in the new year amid unfavourable economic conditions, large corporates are expected to demonstrate resilience in the coming year.

According to him, the economy will return to the path of positive growth in the second quarter of 2021 and this will expectedly impact on the macroeconomic environment which may ease some of the critical economic conditions currently impeding economic growth.

He said Nigeria’s trade dynamics with the global community is expected to remain almost unchanged in the short-term. With imports continuing to outpace exports, trade deficit is expected to widen in excess of N5 trillion in year 2020, thereby putting pressure on forex.

“Looking ahead in 2021, we expect crude oil to sustain its dominance in Nigeria’s export while manufactured imports will most likely dominate the country’s import bill. We anticipate sustained trade deficit in agriculture, manufactured goods and raw materials goods in year 2021,” he said.

The LCCI boss said total capital inflows for year 2021 might likely range between $10 billion – $11 billion, below 2018 and 2019’s levels. The forex policies, security challenges, sustained fiscal & external risks, infrastructure inadequacies, policy credibility concerns and regulatory bottlenecks may keep capital importation subdued in the short-term.

“Foreign Portfolio Investors (FPIs) are concerned about continual rise in negative real return rate on investment due to rising inflation and inability of FPIs to exchange naira repayments into forex. Given that these issues remain unresolved, we believe FPIs will remain cautious about naira-denominated investment securities in the short term,” Yusuf said.

He added that the value of Nigeria’s trade with the global community stood at N23.2 trillion between January and September 2020, with imports of N13.91 trillion and exports of N9.3 trillion accounting for 60 per cent and 40 per cent of total trade, respectively.

“There has been a sustained expansion in the country’s trade deficit since the start of the year, with cumulative trade deficit at N4.6 trillion in the first nine months of 2020 as exports have grown less rapidly compared to imports. The structure of Nigeria’s export basket remained unchanged as crude exports accounted for 74 per cent of total exports while manufactured goods dominated imports bills between the first and third quarters,” Yusuf stated.

He also said, “While recovery to growth trajectory is expected to take full course most likely in second quarter 2021 due to base effect of second quarter 2020 when output contracted steeply by 6.1 per cent. We expect the pace of recovery to remain subdued within the region of one per cent in year 2021 in the absence of shocks. In our view, Nigeria’s recovery prospects depend largely on oil price and production level as GDP performance in recent quarters has significantly mirrored trends in both variables.”

 

 

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VAT claim is about fiscal federalism- Lagos State

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Lagos State government on Thursday said it has a strong case in its demand to collect the Value Added Tax (VAT).

It said its claims were also about fiscal federalism.

The state said VAT collection would neither impoverish other states nor would the process be cumbersome.

Commissioner for Information Strategy Gbenga Omotoso, who spoke on ‘Your View’ on TVC, said: “Lagos has a solid case in the ongoing legal dispute as the crux of the disagreement is about equity, justice and fairness.

“Whichever way it goes, it will also enrich our jurisprudence and enhance the way we see and relate to the law.

“No matter what, Lagos will always stand for true fiscal federalism.”

The commissioner noted that the volume of air, sea and road transport activities in Lagos puts pressure on the state’s infrastructure.

He added that additional revenue from VAT would facilitate infrastructure development for faster movement of goods and services, as well as economic growth for the benefit of Lagos and other states since prices will fall.

On the demand for a special status for Lagos, Omotoso described Lagos as a ‘giant that carries most of the burden of Nigeria on its shoulders and the engine-room of the nation’s financial and business activities.

“Lagos must be empowered to play this role to the benefit of Nigerians”, he insisted.

Omotoso noted that other states can partner with Lagos to generate more revenue or resources by taking advantage of its huge population and massive market to sell their agricultural produce and other products, while profits realised therefrom would be repatriated to create more wealth for farmers and other producers in such states.

According to him, Lagos almost became an orphan following the movement of the Federal Capital Territory to Abuja in 1991, resulting in modest support from the Federal Government.

He was confident there would be resources for more infrastructure and facilities in transportation, health, education, e.t.c, that will benefit Lagosians and others who troop in every day if the state is allowed to collect VAT.

Omotoso added that the state will sensitise residents concerning its position on the debate.

Also yesterday, Akwa Ibom State Governor Udom Emmanuel said states were entitled to collect VAT.

He was a guest on Arise TV News ‘Morning Show’ aired to mark the state’s 34th anniversary.

According to him, it was wrong for the Federal Government to collect and share revenue from VAT because it is generated from businesses and activities in states.

Minister of Finance, Zainab Ahmed, yesterday asked all taxpayers to continue remitting VAT to the Federal Inland Revenue Service (FIRS).

She said in an advertorial: “The ruling of the Court of Appeal employs all taxpayers in all the states to continue to collect VAT on behalf of the government in compliance with the VAT Act.”

But, Emmanuel said despite the huge oil and gas investments in the state, Akwa Ibom receives a paltry N2 billion from VAT.

He backed his Rivers and Lagos states counterparts, Nyesom Wike and Babajide Sanwo-Olu, both of whom have signed their VAT bills.

Emmanuel said: “If my brother state has gone to court, it is the same principle that we stand on. I think we are all in the same bucket, the same basket.

“All the 36 states do not need to join at the same time. Today my brother in Rivers State has gone far enough.

“I think the case has gone to the Appeal Court and there is also a stay of execution.

“Let me allow the rule of law. But for states saying they do not need VAT, maybe they do not know the hidden treasure in VAT.

“If today I sell a house in Uyo, or any other person sells a property, the value is enhanced because of the good roads, electricity, security and water I have created, and the value I have added to the property. Why should the VAT on the property not come to me 100 per cent?

“Just look at the money I have spent on capital projects in the first quarter put at N143 billion, if you take 7.5 per cent of that, why should all not come to me?”

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No going back on mega protest at UN Headquarters – Yoruba Nation, others

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Self-determination agitators operating on the platform of Nigerian Indigenous Nationalities Alliance for Self-Determination (NINAS) have vowed to go ahead with the grand finale of its one-million-man freedom march at the United Nations headquarters in New York, the United States on Friday.

The grand finale of the march coincides with the ongoing UN Assembly where President, Muhammadu Buhari, is expected to address the 76th Session of the UN General Assembly on Friday.

Akintoye in a statement, on Thursday, made available to The Nation by NINAS Director of Communications, Maxwell Adeleye, accused the Federal Government of sponsoring a counter-protest at the United Nations Headquarters tomorrow.

He alleged that the Nigerian Government has started hiring black foreigners living in the United States of America with $500 per head to stage a Pro-Buhari and One Nigeria March opposite the United Nations Headquarters.

Akintoye vowed that the will of the people would prevail no matter how the Federal Government tries to scuttle the NINAS Grand Finale March.

Apart from Akintoye, the Secretary-General, Tony Nnadi, who represents the Lower Niger Congress and Prof. Yusuf Turaki, who represent the Middle-Belt Movement at NINAS have also jointly called on the UN to take urgent step to prevent Nigeria from descending into chaos.

NINAS, which described the 1999 Constitution as a fraud against the people of South and Middle-Belt, having been “enacted without the consent of the people,” demanded the conduct of a regional referendum so that the indigenous people can decide on their nationhood, among others.

All the indigenous people of the South and Middle-Belt in the United States and Canada have been urged to troop out in large number tomorrow.

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TCN lost N1.7bn to Borno vandal activities in nine months – Minister

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The Transmission Company of Nigeria says it has lost N1.7 billion in nine months owing to the destruction of electricity infrastructure in Maiduguri, Borno State. Minister of Power, Abubakar Aliyu, stated this on Thursday at a town hall meeting in Maiduguri.
He said the TCN made the revenue loss from January to September this year.
Aliyu, who was represented by TCN Chairman, Sule Abdulazeez, said the loss recorded was on vandalised electricity lines at an average of 740 megawatts per day.
The minister added that in one month, TCN lost an average of N139 million on the wheeling charges and energy lost in the area.
He said a total number of eight 330Kv towers had been brought down by insurgents in Damaturu and Maiduguri within the period.
The minister said an average cost of reconstructing each tower is about N110 million, translating to about N880 million.
“Five towers were successfully erected and stringing completed on Sept. 17, awaiting energisation before the insurgents brought down another two sets of tower (1193 and 1194) at Auna village the next day September.
“Six towers in Oronta village in Abia state were brought down by vandals in Umuahia, while ten drums of aluminium conductors were carted away disrupting erection of a new tower.
“Also, the Escravos to Lagos pipeline was blasted by vandals disrupting gas supply to over six power generating stations in the western part of the country in 2016.”
As a way forward, the minister recommended executing embedded generation such as the proposed NNPC 50MW gas plant, solar farm, and wind farm in Maiduguri.
Maiduguri and environs have been cut off from public power supply since January as a result of the destruction of power infrastructure by terrorists.

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