NACCIMA: Rising debt profile, economic stagnation,others remain sources of concern-Udeagbala

FG should address insecurity challenges, poor infrastructure, irregular power supply and the increasing inflation rates

Chris Uba

The Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) has  called  on all arms of government to take urgent steps in addressing the persistent  trend of increasing public debt and stagnating economic growth that the economy has been recording for some time.

 The national umbrella chamber of business associations in the country also stressed the  need for the Federal Government to quickly address the increasing insecurity challenges, poor infrastructure, irregular power supply and the increasing inflation rates which has remained a threat to businesses and investments in the country.

The chamber expressed hope “that this will help to project our dear nation as safe destination for investment.”

National President of NACCIMA Ide John C. Udeagbala, who canvassed this position on  Thursday, in Lagos, noted that “since our last press briefing in April, 2022, inflation measured on a Year-on-Year basis, has grown from 17.17 percent as at May, 2022 to 18.6 per cent as at June, 2022. As an economy, we have now surpassed the highest rate of inflation ever recorded of 18.17 percent in March 2021.

According to Udeagbala, “while we welcome the decision of the Monetary Policy Committee of the Central Bank of Nigeria to raise the Monetary Policy Rate from 13 percent to 14 percent, we want to state that this is majorly an inflation management measure and does not address the root cause of the inflation itself, which is rising food prices brought about by a number of factors including the devaluation of the Naira and the cost of energy which has affected production and transportation.

“Nevertheless, we look forward to the continued implementation of the Central Bank’s intervention in the agriculture, manufacturing, energy, healthcare and export sectors, which will ensure some improvement in food and energy supply.”

 On public debt, the NACCIMA President expressed concern about the nation’s rising debt profile , noting  that “Nigeria’s total foreign debt as at March 2022 stood at 40billion US dollars, increasing from38.4billion US Dollars in December 2021. The domestic debt also rose from 23.7trillion Naira to 25trillion Naira within same period.”

According to him, it is now very obvious that the current levels of debt are unsustainable, as the International Monetary Fund (IMF) projects that by 2026, all of Nigeria’s revenue will go to servicing debt.

“As we consider that the National budget is heavily skewed towards recurrent expenditure that is largely unmet by the estimated government revenue, we counsel all levels of government to consider other sources of funding, such as a leveraging public-private-partnerships for tax credits spread over time.

“The economy cannot run based on increasing the number of taxes borne by the private sector, as we have witnessed by recent laws passed by the National Assembly, and we advocate policies that systematically and consistently increase the tax base in terms of the volume of production or the number of tax payers,” he said.

 Udeagbala said such advocacy has begun to bear fruit in collaborations such as the Joint Tax Board’s engagement of the private sector in the implementation of the Single Inter-State Road Tax, an initiative that will expand the tax base of the government without putting undue pressure on existing tax payers even as he also counsel that the executive and legislature make concerted efforts to reduce the cost of governance as a way to reduce the pressure to run government based on debt.

On infrastructure development the NACCIMA President  commended  the Federal Government on the development of key infrastructure within the country, as this has remained a major challenge to the Nigerian private sector , noting  ,however,  that  the pace of infrastructure development is slow in relation to the needs of the economy.

“To match the needs of the private sector towards achieving sustainable economic growth, and considering the fiscal position of the government, we once again propose public-private-partnerships as a way to achieve this solution.

“Government’s sustained collaboration with the private sector on the implementation of Presidential Executive Order 007 of 2019 on Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme, is an example of the successes that can be achieved using this approach to fast-track infrastructural development in our economy, “ he stated.

Udeagbala expressed serious concern on the spate of insecurity in the country, stating that it has assumed frightening dimension with the adverse consequence that “economic activity in Nigeria is currently facing a risk of decline due to the perception of Nigeria as having an investment climate that is unfriendly to business. Recently, the National Bureau of Statistics reported a decline in foreign investment by as much as 81 percent.”

“A loss of Foreign Direct Investment is just one dimension to which our economy is affected by insecurity. Domestic food production is at risk and there is a dimension of insecurity that is contributing to rising production costs and reduced consumption of goods and services. The security situation in our country demands urgent and serious attention,” he said.

“NACCIMA, yet again, calls on all the security agencies responsible for protecting lives and prosperity, to work concertedly and intensify their efforts especially as we approach the electioneering year.”

NACCIMA lamented that the nation’s  economy is still being hobbled by epileptic power supply , adding that the  power sector is of keen interest to the private sector, as it is continually plagued by grid collapse resulting in the instability of power generation, distribution and supply.

While  noting that the  alternative source of energy obtained from the oil and gas sector represents a significant portion of production costs for the private sector, NACCIMA is keen to see the progress of the Presidential Power Initiative formed between Nigeria and Germany during the visit of the then German Chancellor, Angela Merkel and her business delegation which included Joe Kaeser, Siemens AG CEO and signed as an agreement in July 2019, to among other things, increase operational capacity of the national grid.

It, however, noted that “as the private sector awaits the progress of Presidential Power Initiative, immediate intervention is required in the oil and gas sector for which we depend on for our production and transportation needs. Automotive Gas Oil (AGO), also known as diesel,and Jet A1 fuel have become prohibitively expensive forcing a lot of enterprises to shut down or scale down their operations.”

The situation, said NACCIMA, “puts to question the readiness of Nigeria to compete in the global economy especially under trade agreements like the AfCFTA. If urgent action is not taken, the resulting non-competitive nature of the Nigerian private sector will cement Nigeria as a “consumption-only” economy, a dumping group for all manner of foreign goods and services.”

“Urgent action in terms of fixing the domestic refineries, which we continue to harp on at every press briefing, or the implementation of the Petroleum Industry Act which is currently hobbled by the petroleum subsidy regime. If we estimate that Nigeria has spent an average of N2trillion a year, for the past 16 years on petroleum subsidy, it is time to ask ourselves, how many refineries could we have built in that time?

“As we acknowledge the economic impact of a sudden removal of petroleum subsidy, we advocate a gradual removal with attendant policy initiatives to cushion the effect on the economy. As it stands, N4trillion has been allocated in the National Budget for petroleum subsidy, an allocation that exceeds this that for capital expenditure. Yet, this allocation will not be enough to cover subsidy costs.

“To this end, we call on the government to renew focus on implementing policies that ensure that our country is energy sufficient, becomes a net exporter of petroleum products and eventually, electricity.

“We can start by taking a look at other developing countries in this space, such as Trinidad and Tobago, who have never had cause to carry out “turnaround maintenance” on their only refinery or revisiting crude oil to petroleum product swap arrangements. The point to be made here is that the issue of subsidy should not be ignored any longer.”

On 2023 general election, NACCIMA argued that the impact of the electioneering processes on the Nigerian business community is key and significant for the growth of the economy. All the issues presented at this press briefing need to be discussed with candidates who seek our votes. “Our Association will ensure that it engages candidates at all levels and will organize Policy Dialogue meetings to discuss the challenges facing the business community and obtain their positions on these matters.”