Uncertainty, sluggish reforms dampen 2021 economic outlook

By Femi Adekoya

 Though the economy is expected to exit recession in the new year, the Organised Private Sector (OPS) is wary about the business environment and economy outlook, citing the sluggish pace of reform

implementation and uncertainty as key challenges.
  
While economic discourse globally and domestically will centre on recovery in the coming year, the OPS noted that the resurgence of the pandemic is a threat to global economic recovery, adding that the economy risks dipping further if the pandemic persists beyond the first quarter.

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They stated that the Nigerian policy environment remains characterized by uncertainty, as the inconsistent and unpredictable nature of the policy and regulatory environment continues to hurt long-term investment planning and business projections.
  
They also noted that the alarming rate of insecurity in the country tarnishes the perception of Nigeria in the global investment community as no rational investor would commit his resources in an insecure environment. They said insecurity has significant implications for food production, youth unemployment, investment, and economic growth.
  
The Lagos Chamber of Commerce and Industry (LCCI) noted that without bold policies on structural issues, desired regulatory and institutional reforms, constraints to the ease of doing business, including forex shortage, escalating production costs, high regulatory costs, infrastructure inadequacies, and delayed cargo clearance would persist into the new year.
 
The chamber projected that the sluggish pace of recovery would continue to subdue consumer demand, albeit the impact on earnings performance would be disproportionate across sectors. It noted that while most MSMEs would struggle to survive in the year 2021 amid unfavorable economic conditions, most large corporates would be expected to demonstrate resilience in the coming year.
  
In its economic outlook for 2021, the LCCI, through its Director-General, Dr. Muda Yusuf, stated that if the pandemic persists till the first quarter of next year, the Federal Government’s policy direction would most likely change.
  
With the expiration of the Nigerian Economic Sustainability Plan (NESP) in the first half of 2021, the LCCI said the Federal Government would most likely come up with a new national economic development plan to succeed the NESP and Economic Recovery and Growth Plan (ERGP), thus guiding the policy direction of the government in the short to medium-term.
  “Accelerating the pace of economic recovery requires fiscal and monetary authorities to promote growth-enhancing and confidence-building policies that would encourage private capital to the economy.
  
“Investment-led growth strategy is critical to inclusive and sustainable growth and economic growth will remain subdued without sustaining and deepening policy reforms. Genuine commitment in implementing key reforms will not only boost output recovery but will also put the nation on a path of macroeconomic stability,” he added.
  
Analysts at Cordros Securities in their 2021 outlook, also echoed the views of the LCCI, stating that policy-driven action is needed to attract investors and incentivise investments in naira assets. The analysts expressed concerns that though the low level of global interest rates should ordinarily have been a boom for the Nigerian fixed income market, Nigeria is likely to be bypassed, given the current yield environment in the country relative to peer countries, policy flip-flops by economic managers and a distinct lack of forwarding guidance.