LCCI faults budget execution, warns against oil windfall spending

The Lagos Chamber of Commerce and Industry (LCCI) has raised concerns over Nigeria’s fiscal management, warning that weak budget implementation and the Federal Government’s approach to rising oil revenues could undermine long-term economic sustainability.

The chamber made its position known during its second quarterly press conference on the state of the economy held in Lagos, where it assessed key macroeconomic trends and policy directions shaping the business environment.

Speaking at the briefing, LCCI President, Leye Kupoluyi, said recent global geopolitical developments, particularly tensions involving the United States, Israel, and Iran, have significantly driven up crude oil prices, creating an unexpected revenue windfall for oil-producing countries, including Nigeria.

“Global geopolitical developments, particularly the US-Israel conflict with Iran, have pushed Brent crude prices to $115 per barrel, more than 75 per cent above the budget assumption,” Kupoluyi said.

While acknowledging that higher oil prices present an opportunity for increased government revenue, he cautioned against deploying the gains without adequate fiscal safeguards.

“While this creates a windfall in oil revenue, the decision to deploy increased funds rather than save for fiscal buffers raises concerns about sustainability and fiscal prudence,” he added.

Kupoluyi further warned that persistent weaknesses in Nigeria’s budgetary process continue to erode investor confidence and fiscal credibility.

“Weak budget implementation and overlapping budgets further undermine fiscal credibility,” he stated.

The Federal Government had earlier approved a total expenditure of N68.32tn in the 2026 Appropriation Act, an increase from the initial proposal of N58.47tn. The budget is benchmarked on an oil price of $64.85 per barrel and daily crude production of 1.84 million barrels.

Against this backdrop, the LCCI called for a more disciplined and transparent fiscal framework to ensure that public spending delivers measurable outcomes.

“We recommend a disciplined budget process with clear priorities, transparency in debt management, and stronger monitoring mechanisms to ensure that budgetary allocations translate into tangible outcomes,” Kupoluyi said.

On monetary policy, the chamber commended the Central Bank of Nigeria for its recent decision to reduce the Monetary Policy Rate by 50 basis points to 26.5 per cent, describing the move as a cautious but necessary shift toward easing.

“The decision to reduce the MPR marks a cautious but important transition in Nigeria’s monetary policy trajectory,” he said.

However, Kupoluyi warned that borrowing costs remain elevated, posing significant constraints to private sector investment, particularly for small and medium-sized enterprises.

“Elevated borrowing costs are stifling investment, particularly for small and medium enterprises that form the backbone of our economy,” he noted.

The chamber also highlighted rising inflation as a key concern, noting that the inflation rate increased to 15.38 per cent in March 2026, reversing a prolonged period of disinflation.

“Rising food and energy prices continue to erode household purchasing power and increase the cost of doing business,” Kupoluyi said.

On the foreign exchange market, the LCCI acknowledged signs of relative stability, with the naira appreciating to around N1,350.79 to the dollar at the official market, supported by ongoing reforms and improved liquidity.

“The naira has shown measurable resilience, reflecting growing investor confidence and improved price discovery,” he stated.

Despite this progress, the chamber stressed that sustained exchange rate stability would require coordinated policy actions, increased foreign exchange inflows, and continued fiscal discipline.

Kupoluyi also expressed concern over Nigeria’s rising debt profile, which stood at N159.28tn as of December 31, 2025, warning that the trajectory poses long-term fiscal risks.

“While this remains within moderate thresholds, the trajectory reflects mounting fiscal pressures,” he said.

He urged policymakers to adopt more realistic debt sustainability metrics, including debt-to-service and debt-to-revenue ratios, which he described as increasingly concerning.

“We call on the government to consider more realistic measures, such as the debt-to-service and debt-to-revenue ratios, which have both reached uncomfortable levels,” he added.

The LCCI president further cautioned that past experiences show that oil windfalls have not always translated into lasting economic gains.

“The anticipated oil windfall in 2026 offers a positive buffer, but its impact may be limited if not strategically managed,” he said.

Beyond fiscal and monetary concerns, the chamber identified structural challenges affecting the business environment, including poor electricity supply, delays in capital budget releases, and rising cases of telecom infrastructure vandalism.

“When contractors are owed large sums of capital, their operations are stifled, and jobs within their domains are threatened,” Kupoluyi stated.

He emphasised the need for urgent reforms in the power sector, noting that reliable electricity remains critical to industrial growth and economic development.

“Without urgent reforms in the power sector, Nigeria cannot achieve meaningful industrialisation,” he said.

On trade facilitation, the chamber welcomed the introduction of the National Single Window initiative but stressed the importance of full integration and operational efficiency.

“The system should deliver real-time interoperability among all trade-related government agencies, eliminate duplication, reduce delays, and significantly improve transparency,” Kupoluyi said.

Other members of the LCCI leadership, including Director-General Dr Chinyere Almona and Deputy President Olashore Abimbola, echoed the call for coordinated policy actions to address macroeconomic challenges.

They stressed that improving the business climate would require consistency in policy implementation, stronger institutional frameworks, and sustained engagement between the public and private sectors.

The chamber maintained that addressing these issues is critical to restoring investor confidence, supporting enterprise growth, and positioning Nigeria for long-term economic stability.