The performance of the economy in Q1 2018 has come under scrutiny by members of the Organised Private Sector (OPS). While some gave the economy thumbs up, others point to the high cost of funds, energy and dwindling employment as drawbacks, reports Assistant Editor OKWY IROEGBU-CHIKEZIE.
The performance of the economy in the first quarter of 2018 has come under scrutiny. The Federal Government says economic indices have significantly improved, driven by rising investment in agriculture and growing infrastructural provision. Members of the Organised Private Sector (OPS) are of the opinion that there is still room for improvement. To them, the indices used may have put the economy’s performance on the average,
The Federal Government, The Nation learnt, spent N2.7 trillion on infrastructure in 2016 and 2017 fiscal years, an unprecedented allocation in the nation’s history. Encouraged by this and other policies by the government to reboot the economy, Minister of Budget and National Planning Senator Udoma Udo Udoma said the direction of the economy should get OPS members and, indeed, other critical stakeholders excited, as a provision of N1.58 trillion was made in the current year for infrastructure.
Udoma, in his assessment of the economy in the last three years of President Muhammadu Buhari’s administration, said the government’s efforts at repositioning the economy were yielding fruits.
He said, for instance, that the administration’s aggressive investment drive had paid off, with the country recording investments of over $22 billion in two years from foreign direct investors.
Noting that this showed the level of investors’ acceptance and confidence in the economy, he said millions of jobs were created for in various sectors.
Udoma, while responding to public outcry over the high rate of unemployment, said: “It takes time to get jobs back and we are working on getting people back to their jobs. Besides, the economy was in a bad shape when we took over. We are undertaking the N-power project and currently have recruited over 2,000,000 youths and very soon we will be generating about 800,000 jobs.”
He said the government was implementing the Economic Recovery and Growth Plan (ERGP), a medium-term economic plan, launched in April 2017, with the aim of restoring economic growth, investing in Nigerians and building a globally- competitive economy. To fast-track the EGRP’s implementation, the Federal Government has launched the ERGP Focus Labs.
The ERGP Focus Labs brings together stakeholders to identify bureaucratic bottlenecks impacting medium-scale and large-scale investment projects in Nigeria, and then generate ideas and resources to resolve them.
The just-concluded Phase 1 of the ERGP Focus Labs, identified private-sector projects worth about $22.5 billion – and with a potential for creating 500,000 jobs (in agriculture, transportation, manufacturing and processing, power and gas) – for unlocking by 2020.
Udoma said the real sector, particularly agric, has received a significant boost, with the Central Bank of Nigeria (CBN) Anchor Borrowers Programme (ABP) boosting the sector. On ABP’s strength, he said Nigerians could boast of eating and enjoying locally-manufactured rice and other agric produce, which hitherto were imported.
Udoma also said the economy had not performed badly in taxation in the quarter under review. For instance, while five million new taxpayers have been added to the tax base, as part of efforts to diversify government’s revenues, tax revenue increased to N1.17 trillion in Q1 2018, representing a 51 per cent increase on the Q1 2017 figure.
He said although taxation was still very low at about six per cent to Gross Domestic Product (GDP), the government, in a bid to achieve a more- diversified economy, is loaning Small & Medium Enterprises (SMEs) N5 million each to boost their businesses because “we are aware that they are the engine of growth of any economy”.
However, some OPS members and experts in diverse sectors have said the performance of the economy within the quarter under review was average. They also argued that there were still areas of serious concern to private sector operators.
Some of them said the high cost of funds, rising energy cost and earning decline of the non-oil sector, among others, were pains in the neck.
Lagos Chamber of Commerce & Industry (LCCI) Director-General (DG) Mr. Muda Yusuf said apart from the fact that energy cost had gone up, with diesel averaging between N230 – N240 per litre, the high cost of fund at between 30 and 40 per cent was a major disincentive to manufacturers.
According to him, the high cost of fund has excluded a lot of private sector operators from getting credit from banks to run their businesses.
“Banks hardly serve the purposes of indigenous manufacturers. They prefer to put their deposits on treasury bills and government bonds, which is at 17 per cent currently. The tight monetary policy is having a negative effect on the domestic economy,” he said.
Yusuf added that apart from impacting negatively on the number of businesses registered, either as big enterprises or small ones, the high cost of fund was the reason imported goods have an edge over locally-produced goods as they are not competitive in terms of pricing.
The LCCI chief also came down hard on the Federal Government’s ease of doing business initiative. He observed that the policy with regards to the port reforms was still encumbered with documentation challenge, valuation classification and transportation infrastructure.
He also criticised the government for prodding Customs to serve as revenue collecting agency to the detriment of businesses.
His words: “Aggressive tax drive puts a lot of pressure on investors; multiple taxation is an issue. The telecoms sector has complained of paying over 30 different taxes including levies and this is not good for business.”
Yusuf also noted that the late passage of the 2018 budget slowed down the economic recovery process, adding that it has a multiplier effect on government spending. He pointed out that if funds for critical projects were not disbursed on time, the tempo of economic activities would be reduced and the economy would be dragged into a state of inertia and decline.
He expressed worries that the late passage of the budget was a threat to achieving the ERGP targets and Nigeria’s goal of becoming one of the top 20 economies by 2020.
“Capital expenditure such as infrastructural development, construction work and payment of contractors will also be affected.
“This is of concern, especially when these funds are meant to be channeled towards sectors that improve the ease of doing business such as transportation and electricity. Performance of these sectors is correlated with the success of Nigerian businesses, which are key players in the effort to combat the country’s high unemployment rate.”
He said it would also affect private sector operators, who depend on the budget to plan their activities for each fiscal year.
“Delay in passing the budget therefore, slows down their activities, with negative economic consequences,” Yusuf said.
He also said the situation had adversely affected the economy, slowing down the provision of critical infrastructure needed to boost industry and the ability to export locally- made products, with the attendant reduction in revenue and foreign exchange from non-oil exports.
He noted the inadequate absorptive capacity as the country may not be able to spend much money in such little time and this may result in dislocations in the macro-economy.
A former CBN Deputy Governor and Policy Analyst, Dr. Obadiah Mailafia, commended the government for curbing the inflationary rate from 20 per cent to 12.5 per cent and increasing the external reserve from $50 to $70 billion. According to him, these are indications that investors are coming into the country.
On tax policy, Mailafia said things had improved as tax revenues have doubled with huge improvement on Customs income. He, however, cautioned the government on double taxation in most states, canvassing the need for the government to establish a school of taxation as obtainable in France and other advanced economies.
The former CBN boss, however, said, overall, the performance of the economy in Q1 was a mixed bag of some sort, considering that many Nigerians are in despair.
“There is general feeling of uncertainty. The middle class is squeezed. According to a survey by an NGO, CLEEN supported by the Norwegian Government, over 80 per cent of the population,” he said.
Mailafia said although the government was quick to point at agriculture as its trump card, banditry was affecting the agric economy, stressing that it is tantamount to scoring own goal.
He, therefore, called on the government to arrest the ugly trend where human lives appear to mean little as no day went by without reports of killings in the food basket zone of the country and other places.
The way forward
Yusuf expressed regrets that delay in the budget process, often caused by disagreements between the executive and legislative arms of the government, has become the norm. He, therefore, advised that both arms work on improving the schedule of the budget process.
He urged that, going forward, the Executive Order of May 2017 by Vice President Yemi Osinbajo, which placed emphasis on the timely submission of the annual budget estimates of MDAs, should be strictly adhered to.
Yusuf said the Executive Order directed Federal Government Ministries, Departments and Agencies (MDAs) to submit their schedule of revenue and expenditure estimates for the next three years to Minister of Finance and that of Budget and National Planning on or before the end of May of every year.
It further directrf the MDAs to forward their annual budget estimates to the two Ministers on or before the end of July every year.
The LCCI chief also urged the government to create an environment that would create wealth for Micro, Small & Medium Enterprises (MSMEs).
He noted that the economy has not moved significantly as the man on the street, who compared his ability to feed his family, healthcare and job opportunities from 2015 till date, has a negative response.
Yusuf decried that the 25 per cent unemployment figure in 2015, rather than declining, has increased as millions of Nigerians join the unemployment market every year.