The Lagos Chamber of Commerce and Industry (LCCI) has said that the 2021 first quarter 0.40 per cent Gross Domestic Product (GDP) increase, though a pleasant surprise, is not reflective of the manufacturing sector current realities.
Dr Muda Yusuf, Director-General, LCCI, said this in reaction to the National Bureau of Statistics (NBS) GDP Q1 2021 report on Sunday, in Lagos.
According to the report, the nation’s GDP rose from 0.11 per cent in fourth quarter of 2020 to 0.51 per cent in first quarter of 2021, translating to a 0.40 per cent increase.
Yusuf said the recovery of the manufacturing sector from a negative growth territory in Q4 2020 to a positive growth level of 3.4 per cent in Q1 2021 was a pleasant surprise.
He noted that the sector had been grappling with an unprecedented foreign exchange illiquidity crisis over the past few months.
The LCCI Director-General said that structural, irregular policies, institutional and macroeconomic challenges had also bedevilled the sector.
As a result, the LCCI DG stressed that the NBS data did not reflect the reality of the experiences of most manufacturers.
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He, however, welcomed the expansion of 2. 28 per cent in the agricultural sector, 6.31 per cent of the Information and Communication Technology (ICT) sector and the 8.66 per cent of the electricity sector.
Yusuf said that a lot of issues remained to be resolved in the electricity sector, with supply in many parts of the country still epileptic and the metering programme not keeping pace with demand.
“Evidently, the economy is still struggling to recover from the shocks of the pandemic and related slip into recession.
“However, the first quarter GDP data contained a few pleasant surprises.
“The agricultural sector expanded by 2.28 per cent despite the ravaging effects of insecurity, farmers herders clashes and the displacement of many farming communities.
“Most foreign exchange dependent manufacturing sectors have not had a good experience over the past one year.
“Admittedly, segments of manufacturing with high levels of backward integration had lesser degrees of shocks from the forex illiquidity and exchange rate depreciation in the economy.
“The growth of 6.31 per cent recorded in the ICT sector was expected given the opportunities created for ICT in the new normal.
“The cost reflective tariff appears to have impacted positively on the electricity sector which recorded 8.66 per cent,” he said.
Yusuf said the continued contraction of the trade sector which recorded a negative growth of 2.43 per cent in Q1 2021 and the transportation sector at 21.9 per cent was worrisome.
He said that the hospitality and entertainment sectors which were still down needed more government attention..
“We note with concern the continued contraction of the trade sector grappling with headwinds arising from exchange rate depreciation and forex illiquidity, high inflationary pressures, and weak purchasing power.
“Yet the sector is one of the biggest sources of employment , especially in the self employment space.
“It is equally worrisome that the transportation sector experienced the worst contraction at 21.9 per cent in the first quarter of 2021.
“This may be as a result of the growing insecurity on our roads and this goes to demonstrate the multidimensional impact of insecurity on the economy.
“The hospitality and entertainment sectors have been in recession for over a year and the government needs to do a lot more to salvage the sector from complete collapse,” he said.