Dr. Chinyere Almona, the director-general of LCCI, said that

“this development comes at a crucial time as the nation grapples with mounting economic challenges, including inflationary pressures, declining purchasing power, and an increasingly burdensome debt profile. While this intervention is aimed at supporting poor and vulnerable households and firms, its broader implications on businesses and the economy must pose a concern to the business community.”

She noted that the loan’s direct impact on small businesses and vulnerable populations, through grants and livelihood support, presents a potential short-term stimulus, saying that the broader macroeconomic effects must be carefully considered.

“Nigeria’s rising debt burden is a growing concern, particularly given the slow pace of disbursement and implementation of previously approved loans. With the World Bank’s share of Nigeria’s external debt reaching $17.32 billion, the question of debt sustainability becomes increasingly pressing.

“If not efficiently managed, additional borrowing could exacerbate fiscal vulnerabilities, weaken investor confidence, and limit the government’s ability to execute long-term economic reforms.”

Almona emphasised that “from a business perspective, while targeted stimulus programs can offer temporary relief, structural economic challenges such as inadequate infrastructure, multiple taxation, and forex volatility remain unaddressed.

“Businesses require a stable operating environment, and while social welfare programs are essential, they must be complemented by policies that foster productivity, investment, and job creation. There is also concern about the efficiency of fund allocation and utilization, given that only 16 per cent of previously approved World Bank loans under the current administration have been disbursed. This raises questions about the absorptive capacity of relevant institutions and the risk of funds being underutilised or mismanaged.”

To maximise the benefits of this loan while mitigating associated risks, LCCI stated that “there must be a transparent and efficient disbursement mechanism that ensures funds reach the intended beneficiaries, particularly small businesses and vulnerable communities.

“The government should adopt a prudent debt management strategy that prioritizes concessional financing and ensures that borrowed funds are tied to projects with clear economic returns. Beyond short-term palliatives, the government must implement structural reforms that create a conducive business environment. Policies should focus on improving infrastructure, ensuring policy consistency, and addressing forex challenges to support private sector growth and attract investment.”

LCCI DG added, “The Chamber stands on the point that a more impactful stimulus for economic growth is that the government solves the perennial problem of poor power supply and high cost of energy and creates an enabling business environment where small businesses can thrive, creating jobs and generating revenues for the government.

“While the World Bank loan offers immediate relief, long-term economic resilience can only be achieved through a comprehensive strategy that fosters economic diversification, enhances productivity, and strengthens institutional frameworks for effective governance.”

LCCI was reacting to the National Bureau of Statistics (NBS’) report which showed Nigeria’s Gross Domestic Product (GDP) in the second quarter of 2024 recorded a 3.19 per cent year-on-year growth in real terms.

Dr. Chinyere Almona, director general, LCCI, stated this in a public statement, titled, “LCCI Statement on Nigeria’s 2024 Second Quarter Economic Growth Indicator and on Sustaining Economic Growth,” where the chamber urged the government to implement the Petroleum Industry Act (PIA) to the letter.

The 3.19 per cent GDP growth in the second quarter 2024 surpassed both the 2.51 per cent growth in the second quarter of 2023 and the 2.98 per cent recorded in the first quarter of 2024.

The breakdown showed that the services sector posted a remarkable 3.79 per cent growth and contributed 58.76 per cent to the aggregate GDP; the industrial sector also showed a significant turnaround with a 3.53 per cent growth, recovering from the negative growth of -1.94 per cent recorded in Q2 2023; the agriculture sector grew by 1.41 per cent, slightly lower than the 1.50 per cent recorded in second quarter 2023; the oil sector recorded a substantial 10.15 per cent growth in real terms, a stark improvement from the -13.43 per cent contraction seen in second quarter 2023, but its quarter-on-quarter performance dipped by -10.51 per cent.

The chamber said that while the overall GDP growth was commendable, “It is imperative that the government remains proactive in addressing key areas to sustain and enhance economic growth in the remaining months of 2024.”

The LCCI, therefore, recommended improvement in the power sector to sustain the growth momentum in the industrial sector.

Almona stated, “We urge the government to maintain the reforms and initiatives in the power sector to boost the electricity supply.

“It is well noted that the total number of electricity meters provided newly to consumers increased by 3.3 per cent on a month-on-month basis to 6.1 million in July 2024 from 5.9 million recorded in June, but the registered unmetered users of about 13.1 million as of July points to the need for more efforts.”

The chamber also observed that the agriculture sector’s growth remained modest in the quarter under review but stated that harnessing its full potential and driving more agricultural production would require sustaining “interventions introduced in the past months, such as the import waivers to agriculture inputs and improving the security situation around our crop production sites.

“Additionally, improving rural infrastructure to reduce post-harvest losses and enhance market access is critical.”

Despite the oil sector’s impressive year-on-year growth, LCCI said, “Recent happenings in the sector indicate the need for more regulatory prowess in dealing with issues like divestments, crude supply to local refineries, resurfacing oil theft, and pipeline vandalism.

“The plan to hand over the Kaduna and Warri refineries to private sector operators and the eventual refining happening in the Port Harcourt Refinery is critical to the performance of this sector.

“To resolve the many regulatory matters, we urge the government to implement the Petroleum Industry Act (PIA) letters, which have the legal instruments to regulate the oil and gas sector.”

The chamber also stated that the trade sector had performed very well in the past months and grew by +0.7 per cent year-on-year in Q2 ’24 against the +1.2 per cent it recorded in the preceding quarter.

It called for more investments in port infrastructure to boost international trade by stimulating export trade, which would ensure that the depreciation of the naira against significant currencies positively impacted the country’s balance of trade account.

The LCCI said, “The services sector remains the backbone of Nigeria’s GDP, particularly information and communication and financial services.

“Continued support for digital transformation, financial inclusion, and fintech innovations will be vital.

“Regulatory frameworks that promote fair competition and consumer protection should be strengthened to sustain the sector’s growth.”

Almona said LCCI acknowledged the government’s efforts to steer the economy towards growth, amid global uncertainties.

“However, a sustained focus on the highlighted areas will be critical to stabilising the economy for growth and development,” she said.

It cannot be overemphasized that capital is a vital ingredient for economic growth, but since most nations cannot meet their total capital requirements from internal resources alone, they turn to foreign investors.

For instance, the Central Bank of Nigeria (CBN), since the first quarter of this year, has sold trillions worth of treasury bills at near record interest rates in a move to mop up excess cash liquidity in the economy in a bid to tame inflation.

The interest rate on CBN’s Treasury bills have ranged between 19 per cent and 22 per cent near the Monetary Policy Rate (MPR) of 24.75 per cent.

Meanwhile, going by the outcome of the Monetary Policy Committee (MPC) meeting on March 26, 2024, had led to raise in the Monetary Policy Rate (MPR) by 200 basis points to 24.75 per cent from 22.75 per cent; and retention of Cash Reserve Ratio (CRR) of Deposit Money Banks at 45.0 per cent pose a major risk to the financial intermediate role of banks in the Nigerian economy.

This seems to pose a constraint to the capacity of the banks to support economic growth and investment, especially in the real sector of the economy because the increases are quite significant.

Although, analyst  have urged the apex bank to reconsider its decision on interest rate hike.

According to Dr. Chinyere Almona,  the director-general of Lagos Chamber of Commerce and Industry (LCCI), the apex bank should  reconsider its decision on interest rate hike.

She acknowledged the Central Bank of Nigeria’s (CBN) goals of curbing inflation and stabilising the exchange rate as praiseworthy but emphasised the need for these objectives to be achieved without impeding private sector endeavours and economic expansion.

Almona highlighted that the rate hike policy of the apex bank particularly impacted Small and Medium Enterprises (SMEs), pointing out that SMEs, which typically operate on narrow profit margins, depend significantly on access to cost-effective credit to maintain their business activities and foster growth.

In her words: “the recent hikes in the MPR have directly translated into higher interest rates, making it more expensive for businesses to access credit for working capital, expansion, and sustainability.

“We have consistently advised that rate hikes alone will not curb inflation without resolving challenges of the real sector of the economy. The real sector has demonstrated the capacity to create more jobs, manufacture products for consumption and export, and sustain the industrial base of the economy.

“While we understand that high-interest rates attract Foreign Portfolio Investments and local investors to treasury bills and bonds, we lament the drying up of funds away from the private sector to government treasuries.”

On his part, Dr. Muda Yusuf, the  chief executive officer  of Centre for the Promotion of Private Enterprise (CPPE),  explained that bank lending has been constrained by the high CRR, saying, “the credit situation in the economy is already very tight, with lending rate ranging between 25 -30 per cent.

The Nigerian banks are yet to live up to their financial inter-mediation role because of these constraining factors.”

According to Yusuf, the new dramatic increase in MPR to 22.5 per cent hike means that the cost of credit to the few private sector that have exposure to bank credits will increase which will impact their operating costs, prices of their products and profit margins, amidst very challenging operating conditions.

“It is thus imperative for the CBN to accelerate the process of increased capitalization of the development finance institutions to create a concessionary financing window for the real sector and the small businesses,” he said