The macroeconomic condition is a very important component of the business environment as it impacts a great deal on investors’ confidence.
Stakeholders noted that the macroeconomic condition has implications for costs, profits, competitiveness and the sustainability of investments.
The year 2021 is a historic one for the global and domestic economy, characterised significantly by trends of recovery from the coronavirus pandemic. All through the year, the world economy, including Nigeria, continued the battle with the health and economic effects of the COVID-19 pandemic that started last year.
Stakeholders said: “the pandemic has caused huge disruptions to global supply chains and thrown almost every economy across the globe into an unprecedented economic crisis. Nigeria, in particular, is presently confronted with a myriad of challenges, including sustained double-digit inflation, unsustainable debt profile, revenue mobilisation challenges, budget disruption, foreign exchange illiquidity, disruption to business and commercial activities, reduced disposable income, escalation in poverty, and unemployment rates, as well as reduced investor confidence.”
Meanwhile, the country witnessed four consecutive quarters of GDP growth since the exit from recession in fourth quarter of 2021. It had a GDP growth of 0.51 per cent, in the first quarter; 5.01 per cent in second quarter; and 4.03 per cent in the third quarter. These are indications that the economy is on recovery path.
The MAN CEOs Confidence Index (MCCI) Q2 report, revealed aggregate MCCI increased to 52.9 points in the Q2, 2021 from 49.1 points recorded in the first quarter of the year. That was the first time the index value reach and exceeded the 50 neutral points since the Q1, 2020 when it recorded 44.4 points, thus, suggesting that the macroeconomic ambience improved in the Q2, 2021. By implication, the performance shows an improvement in the confidence of manufacturers in the economy.
Likewise, the performances of the individual Diffusion Factors mimicked the Aggregate score except the index of Current Employment which recorded 48.3 points in the quarter under review from 39.7 points observed in the preceding quarter. Although, the index of Current Employment is still below the 50 neutral points, it improved by 8.6 points. However, the performance indicated that employment in the sector was still sluggish in the second quarter of the year.
Current Business Condition scored 50.8 points in second quarter of the year as against 46.7 points recorded in the preceding quarter, thus, indicating 4.1 points increase over the quarters.
Also, Nigeria commenced trading under the African Continental Free Trade Area’s (AfCFTA) on January 1, 2021 and also the signing into law, of the Petroleum Industry Act (PIA) 2021 took place during the year, which marks a significant milestone in the administration of Nigeria’s oil and gas industry.
Events in 2021
The CEO of Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, stated that, Nigerian manufacturing companies, and indeed most investors, are going through tremendous stress at the moment, saying, they are currently grappling with serious macro-economic challenges (inflation, foreign exchange, GDP growth, and balance of trade) and structural constraints impacting on capacity utilisation, productivity and competitiveness.
According to Yusuf, “this is affecting sales, turnover, profitability, shareholder value and the sustainability of investments. The norm globally at this time is to provide incentives for industries to aid their recovery from the shocks of the pandemic and escalating costs and we cannot afford to be doing the exact opposite.” He added that manufacturers, across all product segments need a respite, especially in the light of the unprecedented escalation of production and operating costs.
He noted that inflationary pressure remains a major cause for worry both for businesses and the households as it remains elevated.
He stated that the trade balance was in a deficit of N3 trillion in the third quarter (Q3) of this year, noting that the fundamental issues remain the over dependence on oil and gas for the export earnings.
He added that the huge import bill on petroleum products and the weak competitiveness of the non-oil economy were major contributory factors to the unfavourable balance of trade position.
The past president of Lagos Chamber of Commerce and Industry (LCCI), Mrs. Toki Mabogunje commended the fiscal and monetary authorities, as well as the private sector for their concerted efforts in mitigating the adverse effects of the public health crisis on the economic and business environment in 2021.
She emphasised the response by the government to the shocks and disruptions have seen the introduction and implementation of key reforms that the organized private sector has been advocating for over the years, saying that amongst these reforms are the passage of the Petroleum Industry Act 2021, the proposed removal of fuel subsidy, and more investments in rail infrastructure.
Mabogunje said, the economy will end the year in a positive growth territory, noting that “achieving faster recovery requires the fiscal and monetary sides of the economy to promote growth-enhancing and confidence-building policies that would encourage private capital flows to the economy.
“Fiscal and monetary authorities must develop a medium-term recovery plan anchored on boosting local productivity, supporting the ease of doing business, attracting private investment, developing physical and soft infrastructure, business-friendly regulatory policies, economic diversification, and employment generation among others.”