By Charles Nwaoguji
The Lagos Chamber of Commerce & Industry has noted with concerns that the manufacturing sector has been struggling with growth before the outbreak of the novel coronavirus, despite being one of the biggest beneficiaries of CBN’s loan-to-deposit policy.
According to the Director General of the chamber, Mr. Muda Yusuf the Manufacturing sector contracted by 8.78% in Q2-2020 compared with a marginal 0.43% growth in the previous sector.
“We note that of the 13 sub-sectors in the manufacturing space, only two sectors – chemical & pharmaceutical products and motor vehicles & assembly reported positive growths, while the other 11 sub-sectors had negative growth,” he said.
He noted that the weakness of manufacturing sector was due to global & domestic supply chain disruptions, foreign exchange illiquidity, weak consumer spending and high operating costs.
He said that the GDP report by the National Bureau of Statistics, the economy contracted by a record 6.1 percent in the second quarter, marks the steepest quarterly contraction in Nigeria’s recent economic history.
He stated the contraction in Q2-2020 also ended the three-year trend of marginal but positive growthera the Nigerian economy had after exiting recession in Q2-2017.
“The 6.1 percent 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 destabilized commercial, business, investment, and trade activities,” he explained.
In addition to these, he said that 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.
On non-oil sector, he said that this sector contracted by 6.05% percent in the second quarter, driven by the more pronounced impact of global disruption, lockdown, domestic movement restrictions, flight suspension, restricted international trade as well as subdued commercial & business activities.
The DG stressed that the Nigerian economy is currently in dire straits, adding that 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% and 27.1% 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% of GDP. We acknowledge the commitment of government to support the economy and protect businesses,” he added.