Coronavirus resurgence, oil price volatility put economic recovery in limbo –LCCI

The double whammy of coronavirus pandemic resurgence and sharp volatility of oil prices are the biggest impediments to Nigeria’s comeback to economic growth in the year ahead, the Lagos Chambers of Commerce and Industry (LCCI) has said.

A report signed by LCCI’s Director-General Muda Yusuf and issued on Sunday projected that Nigeria’s economic recovery would be fully achieved in the second quarter of 2021, and that would only be possible if no shocks were recorded.

The LCCI likened the country’s recovery pattern in 2021 to that of 2017, when a rebound in the economy in the second quarter was fast-tracked by an oil price rally and not by interventions on the part of government.

“Recovery to growth trajectory is expected to take full course most likely in Q2-2021 due to base effect of Q2-2020 when the output contracted steeply by 6.1 per cent,” the board of trade said.

“We expect the pace of recovery to remain subdued within the region of one per cent in the 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.”

The LCCI envisaged that the economy would see a contraction of between one or two per cent by the end of this year, further stating that the enormity of the slowdown in 2020 would be grimmer relative to the annual contraction reported in 2016.

According to the LCCI, the absence of decisive policies to resolve dearth of foreign exchange, infrastructural constraints, steep regulatory costs, soaring costs of production as well as slow cargo clearance processes would continue in 2021.

“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.

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“While most MSMEs will struggle to survive in year 2021 amid unfavourable economic conditions, we expect most large corporates to demonstrate resilience in the coming year.

The board of trade noted that beginning of commercial activities at the Dangote Refinery in 2021 would pare down the country’s reliance on fuel imports, which would impact the pump price.

It forecasted that weaker dollar inflows from crude oil exports, foreign investment and diaspora remittances would pile more pressure on fore supply in the year ahead.

LCCI anticipated that the central bank would management strategies on forex demand by rationing and limiting access to foreign exchange for food importation.

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