LCCI calls for downward adjustment in oil benchmark for 2015 budget
The Lagos Chamber of Commerce and Industry (LCCI) has called for downwards adjustments in the budgetary benchmark of oil price which is pegged at $53 per barrel in the 2015 budget.
The chamber feared that there is going to be a further crash in the price of crude oil, which is currently trending at a six- year low of $40 per barrel.
Analyzing the state of the economy recently, President of LCCI, Remi Bello, said prices may crash further when Iran begins to enjoy its international pardon by pumping more oil into the already saturated market. “This may further heighten the fiscal challenges presently facing the country”, it added.
He added that further pressure on the value of Naira is expected as the development weakens the supply side of the foreign exchange market.
The vulnerability of the Nigerian economy to external shocks is beginning to manifest with the collapse of oil crude oil price. The naira exchange rate is under pressure so is the foreign reserve; fiscal stability of the federal and state governments is at risk, as reflected in the inability of many public sector institutions to meet their financial obligations to contractors and civil servants.
The incidence of abandoned projects is on the increase. Capital flow reversals have intensified, manifesting especially in steady declines in the stock market. The implications of this scenario for the macro economy are quite profound and unsettling. From a fiscal perspective, these are certainly not the best of times for the economy, it said.
Bello stated that some of the challenges the nation is facing in the economy today especially with regards to challenges of self-reliance has a lot to do with the poor productivity in the country.
LCCI therefore urge the government to order its priorities properly to invest in infrastructure and build quality institutions to support better productivity in the economy and to support better competitiveness of the economy.
He added “It is difficult to diversify an economy where there are no infrastructures, where institutions are very weak and where the cost of funds is prohibitive. These are the fundamental issues to address.
“Some of the issues we are facing today with regards to import and export processes are manifestation of the weakness of the eco itself especially with regards to the harsh operating environment for businesses to produce”.