In this chat with AKIN ADEWAKUN, the Director General, Lagos Chamber of Commerce and Industry, Dr Chinyere Almona, bares her mind on the state of the nation’s economy, the ongoing reforms of the new government and why such reforms have become imperative. Excerpts:
Many Nigerians have described President Bola Tinubu’s administration as starting on a high note, especially with the series of its policy pronouncement in the last few weeks. What’s your general assessment of the new administration?
I think there has been many shifts from where we were in the past, and I am glad that a lot of things that we’ve been talking about at the chamber over the years, we’ve seen them change. These are things that are not always pleasant to change; things people will not accept quickly, or gladly. But they are changes that are required to ensure that the economy begins to grow. The economy had been bleeding for too long, and it was important that they took action on the things that we’ve been talking about. For instance, when the Petroleum Industry Act (PIA) was signed, we were hoping that fuel subsidy would be outdated very quickly, but the government then wasn’t quiet eager to do that. Unfortunately, petroleum subsidy has become an emotional issue for Nigeria, because there is this sense that ‘oh, we are oil producers, why should we pay more? Why should we struggle?’ So, in the short term, it would appear that the lower prices were fine with everybody. But we could see that they were not helpful for us at all because in the longer term, we were not seeing the development that we were hoping to see and achieve in the bigger economy. Besides, it was clear that corruption was beginning to jump in, to muddle up the waters. So, it wasn’t benefitting anybody, but was rather depressing the economy. And so from what we have seen in the last couple of weeks, with the subsidy going off, and with everybody now thinking ‘what can we do differently?’ there seems to be an upturn, a kind of positive spin with things in the economy.
But there are some who believe the issue wasn’t properly handled, that it should have been better done?
No two leaders are the same. We take decisions based on how we perceive things. If we were to wait for the best approach, we probably wouldn’t get it done. We would just talk and talk, but no solutions, and everybody would forget it, as we used to in the past. Unfortunately, our indecision was costing the nation humongous amount of money. We were bleeding, and we needed to stop it fast. The debate of whether he should have done it on the first day, or wait a little bit longer, I don’t know, but that was his style. The point is, it must be done, and it has been done.
As the authentic voice of the nation’s organised private sector (OPS), what is the feedback like among your members?
As the authentic voice of the organised private sector, we are always futuristic. We couldn’t have been here since 1888 without being futuristic. So, we are thinking long term, not just short term. Today, members are struggling. Expectedly, businesses would struggle anytime there is a shift or change that affects their costs. But such struggles are usually in the short term. The removal of fuel subsidy is not pleasant. It’s like taking a drug. When we were younger we would take quinine, and it’s exactly not sweet. But they would tell it’s for your own good. You have to take it. It’s the same thing. The feedback we are getting is that it is bitter, and we know that it is bitter, but if we had taken this action 30 years ago, we wouldn’t be where we are today. We’ve left it to decay, and that’s why it’s so painful.
Another reform of the new government is the floating of the naira, which some have argued is like technically devaluing the naira. Do you agree with this?
The difference between the official and the black market rate was so huge, and what that tells you is that it’s not sustainable. Secondly, there is a lot of arbitrage. So I can sit in my house, find a way to get it at N450, sell it at N750 and make my money. There is no value being created. And so it wasn’t helping anybody, including the economy, and to worsen the issue, there was even scarcity. It wasn’t even available to the common people. Most manufacturers were getting their forex from the black market, and their cost of doing business was being affected. Therefore, there was the need to streamline. You may not have a situation where the black market and the official rates are exactly the same, but it can’t be a difference of almost double. So we needed to clean it up, and ensure we know what we are targeting. And there was also the argument about who was actually getting the dollars? Either the privileged people or those connected to the regulators. So the manufacturers were struggling, our members were struggling, because it was scarce. They would wait on the queue, and the transaction must have expired before finally getting it. The system wasn’t just sustainable. It wasn’t paying the critical sector of the economy, manufacturing. Therefore, bringing it together, or trying to eliminate that difference is helpful. Now, hoarding of the dollar for incentives is no more. So the dollar, hopefully, will be a bit more available. However, the important thing is that we need to get the productive sector working such that we are able to add more value to our manufacturing process, to make us export- ready. By this we will be able to export more. Why we are not exporting more is that, of course, the cost of production is so high, to the extent that when we export, we are not competitive. So we need support to reduce cost of doing business so that we are competitive, and we are able to export. When we export, foreign currency will come in. We need to get the manufacturing sector up and running, and that would mean government coming up with the right policy that will enhance manufacturing and small businesses. We always say that small businesses are the engine of any economy, but we see here that they are depressed. All the costs are being layered on them, so they are struggling. So there has to be some way to help alleviate the problem that they are facing.
But, how do we now deal with the attendant hike in the costs of goods and services induced by these series of reforms?
I’m hoping that the new government will also have a targeted way of dealing with it. One of such is by creating an enabling environment to do business. Yes, everything is going high, but then if we get into production, and government is giving some incentives to businesses or moderating tax expectations, then you are going to have a private sector that is alive, and able to produce more. And when you produce more, you employ more people, and then you have the ability to purchase. It’s a cycle. But we need to produce more, that’s what is important. I don’t think it will be right to put our hands on our heads and say ‘prices have gone up now, we are all dead’. We can get creative. We have to begin to look inward. That’s the only way we can sustain ourselves. If we say everything has gone up, then what’s the alternative? It was artificial to give you low prices, and make you feel okay, and it’s killing us in the future. It’s of no use. Yes, prices have gone up, but we are hoping that we need to get productive, and things will get better.
Do you think this ‘patient’ is strong enough to take all these ‘drugs’ at a time, considering the fact there are even strong moves to increase electricity tariff?
I think it’s either you give the patient the quinine to drink or you just let him die. If you give him quinine, there is hope that he may get better. We may say let’s give some fruits that will help him manage the after-effects of the drugs, that’s what we are saying to government. So government needs to think about how it can support the private sector. But these issues have to happen. As for the hike in the electricity rate, we are hoping the sector is developed. We are hoping that we’ll have investment in the sector, because the truth is the average Nigerian is paying the bills but not getting power, either metered or unmetered. So they still rely on diesel, petrol which is high now, you have to generate your own power. If you have more investments in the sector, over time the cost of power is likely to drop. And the rates will become truly market-reflective, and it will not be government trying to hold on to the rate. If you hold on to the rate, anyone who wants to invest or build infrastructure in the space will say there is no point building infrastructure because I won’t get my returns. But if I know that I can come in and build, then it’s fine. The more people can come in and build, the more we are employing people, the more we are increasing their economic capacity. And so it flows that into the system. So we have to understand that some of these decisions are tough, but they have to be made. It’s been long we’ve been saying electricity tariff must be market reflective. If that is the case, you can’t have arbitrary rating. No international investor will want to come and invest if today government wakes up and say ‘oh, no it has to be this amount’. If we are able to grow the sector, then there will be electricity for everybody. The small businesses, the hairdressing salon, the barbing salon and other SMEs will have power. They wouldn’t have to generate their own power which is eating into their operational costs. At least they can do business, and if they are able to do business, it flows back into the system. My only concern is that let us not go this far and not gain the benefits of coming this far. In all these things that we are doing, let us see that we get to the end of this, and get the development that we are hoping to see, and we see those development happening in the economic sector.
And, if you were to advise businesses and Nigerians on how to survive this economic turmoil, what would those pieces of advice be?
I think it’s clear that we need to look inwards. And certain things that we’ve been looking outside for, raw materials et al for production, we need to begin to think of how we can find such materials internally. For the average Nigerian, I think over the years, Nigerians have developed sweet tastes for imported items, can we look inwards? Can we patronise made- in- Nigeria goods? When we start to patronise made –in- Nigeria goods, we are also helping to build the production capacity of local businesses.. Whether you are in business, and as an individual, look inwards.. In our own homes, are we looking inwards, regarding the things that we consume? Besides, everybody must begin to think of cost maximization. Gone are the days when it wouldn’t matter even when some business expenses were high. But now it does. For instance, why do I have to travel to London for a meeting when such meeting can be conducted virtually? Can’t it be done over zoom? We have to be conscious of costs and try to be as efficient as possible. Cost optimisation should be the number one thing on every business person’s mind. The revenue is dwindling, so you have to try not to have high cost profile. You have to try as much as possible to also lower your cost in order for you to make a profit or break even, both businesses and even individual have to think in that direction.
How prepared are Nigerian businesses for the African Continental Free Trade Area (AfCFTA)?
Businesses are not as prepared as they should be and I would say even the AfCFTA protocols, the guidelines that were supposed to be laid down are still in the works. The Chamber has engaged with the National Action Committee on AfCFTA, to try and prepare SMEs through educating them on what is required, and this includes processing for your production, things like the Rules of Origin, what percentage of local contents must be there for your goods to be AfCFTA-compliant, things like the standards, among others. We have to be mindful of quality standards, so there is a lot of education required, and the Chamber is working with the National Action Committee to provide education and awareness for SMEs. So you are right we are not as prepared as we should be, and we need to speed up, and have more parties work with us and business community to get SMEs ready, and to get exporters ready. The truth is if you are not ready for the international market and you are stepping into it, you kind of shortchange yourself. You would have made all those efforts, and there would be no benefit, because you would have got out there, and discovered your products are not of the right quality, or haven’t followed the right guidelines, or not competitive because they are too expensive. So we have to go back to the drawing board, and act together regarding what needs to be done, understand what the protocols are like, what the guidelines are, what the rules are, and how we can follow the rules. We have started to do that with our members and others within the business community to try to get up to par, with what need to be done.
The Chamber has been around for over 13 decades (since 1888), one would have expected that the drums would be rolled out in celebrating this?
Yes, you are right. We are having series of activities for the anniversary. Recently, we had the unveiling of the anniversary logo. Now we have other things planned for the rest of the year. For instance, the Lagos International Trade Fair is going to be a bumper fair. Everything we are doing is like mega because of the anniversary. At this fair, we are going to have a lot of special features. We are going to have a children’s corner this year, so people can come to the fair and leave their children to play, which is unique.
What are you doing to further engage the new administration regarding the private sector?
For us at the Chamber, we are in a pride of place in that we have an open line of communication with the federal and state governments. We have the pedigree and they reckon with us, and they hear what we say. That means we can engage with them on an ongoing basis. Engaging with government is not a one-off and we see that apart from the presidential aspirants that came, we also organized for state candidates as well at a time. So with this new administration kicking off, we are also engaging to say there is a roadmap on the things that the organized private sector required. And with the chamber, I guess because we’ve been there for so long, we are consistent with what we say. So it’s important for us to provide government with some idea, some guidelines regarding what the private sector require, and it’s not a one-off thing. We speak to government whenever there is the need to do so. Over the years, we’ve not had any issue, speaking to government. They may not all the time listen to what we say, but it’s on record that we’ve said this, and we’ll continue to say what we say. We’ll continue to engage them. There are some reforms that happened because we spoke. Some of the port reforms occurred because we spoke. Sometimes they will listen to you, sometimes what is required is proper dialogue with organized private sector, such that some of the rules and laws that are being made, you can see how they influence the sector. If the impact is negative, we can give them the reasons that this is not the best way to go about it, and not just say this is not the best way to go about it, but tell them we have researched, and these are the other options. That is why wehave research and advocacy department. So they do listen to us because we always come to the table prepared to have conversation.
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