Why Nigerians May be Poorer in 2020, Manufacturers Raise Concerns
Nigerians’ hope of a better economic outlook in 2020 may not be realised unless some lingering challenges are addressed and the anxieties about more taxes, unfavorable government policies and higher inflation are doused, some members of the organised private sector have stated.
The Guardian reports that manufacturers and operators in the services sector expressed worry that the familiar challenges of inadequate electricity supply and high cost of self-generated energy, as well as multiple taxation and overregulation, remain rife in the business space.
Nigeria’s improvement on the ease of doing business ranking notwithstanding, the Lagos Chamber of Commerce and Industry (LCCI), in its 2020 outlook, stated that the nation would witness a high cost of doing business, as the challenge of infrastructure deficit lingers and the consumer’s purchasing power weakens.
According to the chamber, the realities on ground contradict the outcome of the ranking as recent policy measures and lingering challenges of power supply, inefficient road and railway system, multiplicity of taxes as well as other issues continue to affect the nation’s potential. In terms of growth, the chamber aligned with the position of the World Bank and the International Monetary Fund (IMF) that growth would hover at 2.1 percent and 2.5 percent, which is below the population growth rate of some three percent, implying that the per capita income would contract further, making more Nigerians poorer.
“We expect economic growth to remain subdued at around two percent by 2020 as consumer demand, as well as private sector investment, will most likely remain weak,” the chamber added.In the LCCI 2019 Economic Review and Outlook for 2020 made available to journalists at the weekend, the LCCI’s Director-General, Dr. Muda Yusuf, stated that the nation’s economy remained susceptible to external shocks, most especially oil price fluctuations. Yusuf, who said that the performance of the trade sector in 2020 would be shaped by the direction of government policies, anticipated that the manufacturing sector would continue to benefit from the Central Bank of Nigeria (CBN) aggressive credit push. He, however, predicted that competition between foreign and local producers would fade out due to prolonged closure of land borders.
The director-general said that headline inflation was expected to trend higher in 2020 and it would be driven by the implementation of the new minimum wage and the continued closure of the borders. According to the LCCI, higher Value Added Tax rate of 7.5 percent and early disbursement of funds for budget implementation, following the return of the budget cycle, would also be contributory factors.
“We are of the view that failure by the government to fix structural constraints with regard to fixing power challenges and rehabilitating deplorable road networks, will perpetuate the poor productivity and performance of the sector. In our opinion, continued protectionist measures of government will most likely limit growth in 2020.
“Elsewhere, the level of the country’s engagement in the Africa Continental Free Trade Area (AfCFTA) scheduled to kick off on July 1, 2020, will also impact the performance of the trade sector.
“As a sustainable solution, it is imperative to fix the fundamental issues of high cost of domestic production, the prohibitive cost of cargo clearing at the Lagos ports, prohibitive import tariffs, high cost of logistics within the economy, and border policy capacity,” he said.The chamber projected improved credit flow to the agricultural sector on the back of proposed increase in deposit money banks’ loan to 70 per cent. It added that a prolonged closure of the land borders would lead to higher agricultural output in 2020.
“The monetary value of agriculture output has been on the upward trajectory, rising by 40 per cent quarter-on-quarter to N5.41 trillion between July and September from N3.86 trillion between April and June, compared with N3.60 trillion in the first quarter.
“The CBN, like it did in 2019, will maintain the status quo by not relenting in supporting the sector with the much-needed funds in ensuring that the wide gap between local demand for food and supply is bridged.
“However, risk factors to our prognosis, include security challenges in the north-east zone, a major food producing region in the country; and resurgence of herders-farmers clash in the north-central region. Overall, we expect the sector to sustain its upward growth trajectory in 2020,” he stated. On the visa-on-arrival policy of the government, the LCCI said it would ensure economic integration between Nigeria and other African nations, particularly with regard to the ACFTA.
“We hope the necessary government agencies would take steps required so as not to expose the country to security risks and properly scrutinise those that would be coming into the country through the visa-on-arrival facility.”
The LCCI proposed the adoption of a visa free policy for nationals of selected advanced economies to facilitate the inflow of investment from such countries to Nigeria. To unlock the potential of the Nigerian economy, the chamber proposed the promotion of economic inclusion through a right mix of fiscal, monetary and investment policies, regulations and institutions.
“The potential for growth of the Nigerian economy is immense, but we should not remain a nation of potential. In order to unlock this huge potential, we need to put in place appropriate policies, regulations and institutions. Investment is critical to the growth of any economy: this is even more so in an economy that is struggling with revenue and other resources.
“Growth in private investment will boost employment, impact on revenue, promote social stability and enhance the welfare of citizens. It is thus very fundamental that we create an enabling environment for investors (domestic and foreign) to create wealth and jobs for the country. There is also a need to deepen the consultative process between the policy makers and the private sector,” the report said.
On budget implementation, the LCCI urged the government to create a monitoring mechanism to ensure compliance, adding that progress reports about the budget performance should be released quarterly. To the Manufacturers Association of Nigeria (MAN), local manufacturers’ confidence in the economy remains challenged by the parlous state of infrastructure and poor implementation of policies, especially the patronage law.
According to the manufacturers, the formulation of laudable policies has never been an issue for Nigeria but evidence has shown that poor implementation has been the challenge in the country.
Follow us on Twitter at @thesignalng
Copyright 2019 SIGNAL. Permission to use portions of this article is granted provided appropriate credits are given to www.signalng.com and other relevant source.