Nigerians to see poverty, inflation, debt worsened in 2021— LCCI— 2mins read
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POVERTY, inflation and debt may increase in Nigeria this year due to COVID-19 resurgence and poor economic fundamentals, according to the 2021 Economic Outlook recently published by the Lagos Chamber of Commerce and Industry (LCCI).
In an economic review of 2020 and outlook for 2021 signed by Muda Yusuf, director-general, LCCI, the Chamber says Nigeria can avoid these trends by making the right policy choices.
“Poverty levels in Nigeria will continue to rise and living standard will deteriorate without robust productivity growth,” the Chamber says.
“The country needs the right policies and institutions to spur productivity growth and to have this achieved requires adoption of best practices in human and physical capital development, governance, and economic openness.”
The Chamber notes that headline inflation will remain elevated in 2021 as the combination of food supply shocks, foreign exchange (FX) policies, higher energy costs, FX illiquidity, and heightened insecurity in major food-producing states continue to pressure domestic consumer prices.
It further says that debt stock, which stood at N32.2 trillion in September 2020, will rise and debt-servicing to revenue ratio will be elevated as Muhammadu Buhari’s government continues to seek loans to fund projects.
“Looking forward, a resurgence of COVID-19 pandemic in year 2021 may propel the federal government to take on more (concessionary) borrowings to fulfil fiscal obligations. Additionally, a potential FX adjustment in a bid to ease pressure on the local currency (naira)might possiblyexpand Nigeria’s external debt portfolio and total debt stock in year 2021,” the chamber predicts.
It projects that the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) will be faced with a tough policy choice of boosting economic recovery and tackling inflation this year.
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The LCCI expects that oil price and crude production, GDP growth, inflation rate, FX trends, private investment inflows, credit to private sector and domestic interest rates will influence monetary policy direction in the short to medium-term.
Inflation in November rose to 14.89 percent from 14.23 percent in October as food prices rose sporadically on border closure and high production cost. Central banks rarely cut the interest rate in periods of high inflation, but investors and small businesses are in search of single-interest funds to expand.
The Monetary Policy Rate in Nigeria is 11.5 percent, but South Africa’s repo, equivalent to Nigeria’s MPR, is 3.5 percent. Kenya’s MPR is 7.25 percent, while Zambia’s is 8 percent. Ethiopia benchmark interest rate is currently 7 percent while Namibia’s is 7.75 percent. Average lending rate in Mali is estimated at 9.12 percent while it is 4.25 percent in Botswana.
Nigeria has been world’s poverty capital since 2018, with 87 million people in extreme poverty, according to Brooking Institute’s World Poverty Clock.
On the 2021 budget, the Chamber predicts a modest budget performance in the light of current realities.
“Global oil demand is expected to remain subdued in the first half of year 2021 considering the resurgence of covid-19 pandemic in Europe, America, and parts of Asia,” it notes.