The Centre for the Promotion of Private Enterprise (CPPE), a private sector advocacy and economic think tank, has aired its opinion on key economic developments, highlighting the implications of these on investment and Nigeria’s economy.
In its 2022 first-quarter economic review released on Monday, the CPPE identified economic headwinds hurting the economy in the last months to include the worsening security situation in the country, the escalating energy cost, exchange rate depreciation, liquidity crisis in the foreign exchange market and the spiking inflationary pressures.
According to the CPPE Chief Executive Officer, Dr Muda Yusuf, the worsening foreign exchange crisis, escalating energy cost and insecurity in most parts of the country are contributing to the continuous depreciation of the Naira, escalation of production and operating cost and scaring investors.
“This trajectory portends serious adverse implications for economic growth prospects and investment outcomes. We cannot retain, scale or attract investment in an environment that is not secure. This is true of domestic and foreign investments.
“The situation continues to pose a very serious challenge to lives and livelihoods. Investors’ confidence has been greatly undermined with investments across all sectors being adversely affected. When investment is in jeopardy, livelihoods are negatively impacted. Worsening insecurity is adversely impacting lives and undermining livelihoods,” he said.
To address the perennial challenges faced in the power sector, Dr Yusuf said the dependence on the national grid for power supply should be decentralised and other energy mix like renewable energy sources, adopted.
“There should be greater emphasis on off-grid solutions in order to ensure the decentralisation of the power sector. The country is too vast for the highly centralised regime of the national grid. The continued ownership and control of the transmission component of the power supply chain is also a challenge to grapple with.
“We should ensure the rapid promotion of renewable energy solutions through the enactment of policies that will make it more affordable. The current high cost of acquiring renewable energy installation has been a major impediment to the access of this energy solution.”
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On the issue of debt sustainability, the CPPE CEO opined that cutting down n government spending and investing in economically viable areas like infrastructure would change the trajectory.
He said: “We cannot continue to increase borrowing on account of the relatively low debt/GDP ratio. We do not service debt with GDP, but with revenue. Close to 40 per cent of our GDP do not contribute appreciably to revenue.
“We need the political will to cut expenditure and undertake reforms that could scale down the size of government, reduce governance cost, ease the fiscal burden on government and boost revenue. It is important to ensure that the debt is used strictly to fund capital projects, especially infrastructure projects, that would strengthen the productive capacity of the economy. Additionally, emphasis should be on concessionary financing, as opposed to commercial debts which are typically very costly.”
The centre noted that the increase of headline inflation from 15.60 per cent in January to 15.70 per cent in February 2022, though marginal, is spiking inflation for households and businesses.
“To tackle inflation, all forms of taxes and levies on the importation of petroleum products should be suspended to give a respite on the spiking energy cost. There should also be deeper stakeholder engagements across sectors to develop an enduring strategy on the way forward,” the centre noted.
It also said that the e-invoicing and e-valuator policy of the Central Bank of Nigeria (CBN) “will only worsen an already bad international trade transactions process. The policy will increase transaction cost, entrench red tape, increase uncertainty, escalate business disruption, weaken investors’ confidence and heighten corruption risk” and should be left with the agencies with statutory responsibilities to do so.
“The increasing incursion of the CBN into the trade policy space is an aberration in our economic management system and a serious cause for concern to the business community. Issues of import valuation and classification are statutory functions of the Nigeria Customs Service, with the Finance Ministry as the supervising organ.
“The decision of the CBN to now undertake valuation and product price benchmarking of imports and exports is a duplication of the statutory responsibility of the Nigeria Customs Service. It will create an additional regulatory compliance burden, bureaucracy and costs for the business community,” the centre said.
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