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Economy Slips Into Negative GDP Growth

By New Telegraph

The Lagos Chamber of Commerce and Industry (LCCI) has said that contraction in Nigeria’s Gross Domestic Product (GDP) by December, 31, 2016, would send bad economic signals to the global market.

It noted that there were negative GDP growths of -0.36 per cent, -2.06 percent and -2.24 percent in the first, second and third quarters of the year respectively.

The chamber noted that the country’s economy suffered contraction for two consecutive quarters this year since it slipped into recession.

A source, who spoke with New Telegraph at the Chamber, explained that the Chamber was wary of the continued recession in the economy.

He alleged that insensitivity on the part of the Federal Government to grow the country’s economy through its various policies was already threatening Nigeria’s dream of joining top 20 economies by year 2020.

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The source said that capacity utilisation had dropped significantly from the initial 40 percent in the second quarter of last year to about 25 percent. He noted that the best way for the Federal Government was to turn around the ailing economy and instil investors’ confidence.

The source stressed: “Developments in the business environment have been influenced largely by global and domestic factors. The features of a declining economy had long manifested in the horizon before the declaration of technical recession.

“We have weak and declining purchasing power, high unemployment, weak investors’ confidence, weak fiscal position of government at all levels, drop in sales and private sector profitability, low and declining capacity utilisation, among others.

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“High energy cost, escalating cost of transportation, high interest rate and weak exchange rate impacted on productivity and competitiveness across all sectors of the economy. Inflation reached a peak of 18.3 percent in October, 2016, the highest in recent years.

The inflation figure was 9.6 percent in January, 2016.”

He explained that the year has posed challenges to the manufacturers as difficulties in the country’s business environment persisted, especially the foreign exchange crisis, dwindling government revenue, high interest rate, attacks on oil installations and weak commodity prices.

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According to him, only 46.71 percent of raw materials are sourced locally in country.

Speaking on the dwindling capacity utilisation, the LCCI source noted that the capacity utilisation of most of the manufacturing companies operating in the country’s industrial sector was declining amidst harsh operating business environment.

He said: “Source of raw materials, foreign exchange and others has affected the industrial production of many manufacturing companies in Nigeria.

The reason for this low capacity utilisation is because there is scarcity of foreign exchange in the country and this prompts more people to now look inwards in sourcing for raw materials.”

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Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan.

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