The Lagos Chamber of Commerce and Industry (LCCI) on Tuesday expressed fears about the fate of the nation’s manufacturing sector and indeed the business community this year, following the ongoing austerity measures proclaimed by government.
As a result of the austerity and monetary policy measures being undertaken so far, especially following the devaluation of the Naira in November, LCCI warned that inflation rate could cross the double-digit market in the first half of the year.
Consumer Price Index, which measures the rate of inflation in the country, eased to 7.9 per cent in November 2014, from 8.5 per cent in August, according to the National Bureau of Statistics (NBS).
The LCCI’s Director General, Muda Yusuf, said “many firms are already feeling the heat across all sectors as a result of naira exchange rate depreciating by over 11 per cent in the interbank market and over 12 per cent in the parallel market making the operating cost of firms very profound, even at the beginning of this year.”
Yusuf, who spoke during a review of the economy in 2014, lamented further: “Our concern is that the combined austerity measures of the government and tighter monetary policy would put additional pressure on consumer prices, and so, we expect inflation rate to cross the double digit mark in the first half of this year.”
On the risk of payment default by the Federal Government, Yusuf noted that with declining revenue, the risk of default in payment for jobs executed for government agencies would be higher in the short term.
“This situation calls for cautious engagement with government contracts at all levels of government because as government revenue contracts, the capacity to meet financial contractual obligations in 2015 may be difficult,” he claimed.
“Already, some MDAs and state governments are having difficulties in the payment of workers’ salaries as many of the states are also currently servicing debts having raised funds in the capital market,” he said.
The chamber, Nigeria’s oldest, expressed worries over the continuous crash in the price of crude oil at the international market, warning that the optimistic oil benchmark of $65 adopted for the 2015 National Budget might be plagued by more projection risks in view of the fact that oil price is already trending below $60.
He noted that as a result of the import dependent nature of Nigeria’s economy, the sharp decline in exchange rate has naturally pushed up the operating cost of enterprises in the economy.