Lagos Chamber of Commerce and Industry, LCCI has said that although the relaxation of monetary policy is yet to impact the economy, the gross domestic product will rebound in 2016.
While reviewing the year, 2015, LCCI noted that the business environment was faced with multiple challenges including insecurity and political tension during the year.
In a statement signed by Director General, LCCI, Muda Yusuf, the chamber while commenting on the macro-economic outlook for 2016 said “ Gross Domestic Product, GDP growth is expected to rebound, though, slowly to about 3.5 % if the right mix of fiscal and monetary policies are put in place to stimulate the economy and attract domestic and foreign investments. While the recovery is expected to be driven by increase in government expenditure, the growth in oil sector may be constrained still by low price and investment drive.
“Meanwhile, the exchange rate volatility is expected to persist fuelling high inflation of about 10-11%. However, correction towards Real Effective Exchange Rate (REER) in the form of exchange rate adjustment is likely in Q1, 2016.”
The Chamber insisted that “The targeted N300 billion by the Nigerian banks to boost lending to Small and Medium Scale Enterprises (SMEs) and the agriculture sector in 2016 will boost SMEs development and employment and thus increases non-oil export.
“The insurance industry will remain largely underpenetrated with insurance density at about 0.225%.Therefore, significant change in this industry with respect to growth and penetration remains bleak even as the sector is still highly fragmented. The declining GDP is also expected to strain, to a large extend, the performance of this industry.
“Subsidy arrears payment and end of subsidy regime likely to result in improved market efficiency and profitability as downstream sector players explore pricing dynamics to boost investment. The expected deregulation in the downstream sub-sector will be a game changer.”
“With the declining trend of global oil price and its attendant impact on government revenue and foreign reserves, general business outlook will remain tense. Implications on cost of and access to credit will be undesirable. Businesses, especially those with high forex exposure, will continue to face challenges of meeting foreign obligations to suppliers and partners. This will also impact contractual trust and integrity.
“Risk of default in financial obligations in both public and private sectors will be high as macro-economic conditions and cash flow remains tight.”