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By Merit Ibe [email protected]
Nigeria’s Organised Private Sector (OPS) has raised the alarm over the worsening business climate, describing it as completely suffocating for enterprises and a serious deterrent to investment.
The OPS insists that the oppressive conditions, ranging from erratic policy shifts to deteriorating infrastructure, are crippling business growth and discouraging both local and foreign investors.
Without swift reforms to foster a more supportive environment, the sector warns that Nigeria could face prolonged economic setbacks and diminished competitiveness on the global stage.
The President of the Lagos Chamber of Commerce and Industry (LCCI), Mr. Gabriel Idahosa, has urged the federal government to be transparent with Nigerians and the business community regarding the trajectory of its policies and the realistic short-term outcomes.
Idahosa emphasised that clarity is vital in creating a sense of certainty, which in turn empowers businesses to make well-informed decisions and develop strategic plans for the future.
According to him, with the CBN’s monetary policy rate at 27.25 percent (with allowance up to about 34 per cent), inflation elevated at 32.15 percent (August 2024), an exchange rate above N1620 per Dollar, and an unemployment rate at 5.3 per cent,” we run a business environment that is too tense for businesses to thrive. Since the inception of this administration, petrol prices have risen by about 430 percent to date.”
On the new petrol pump price by the Nigerian National Petroleum Corporation Limited (NNPC) and other major marketers, Idahosa noted that the indicators may worsen in the coming months due to a thriving speculative environment, harsh regulatory ecosystem, unguided controversies, persistent insecurity challenges, and weakening purchasing power that restrain demand for goods and services.
Businesses, he stressed, are trying “to understand that the recent fuel price hikes could be the government’s intention to fully deregulate the oil and gas sector and implement a complete fuel subsidy removal policy.
“However, the dynamics and controversies around these steps create most of the distortions we experience in the business environment, making businesses operate under dark clouds of uncertainties.”
The LCCI boss decried that it has become difficult to understand the plans and moves taken by the Ministry of Petroleum Resources, the NNPCL, and the various oil and gas sector regulators in the face of recent happenings, adding that the controversies surrounding the working relationship between NNPCL and the Dangote Refinery are equally confusing.
He bemoaned that businesses have continued to suffer from increasing burdens of rising operating costs incurred on logistics, power supply, scarcity of forex for critical inputs, and inflated costs on third-party sourced services.
Idahosa stated that addressing the challenges businesses are faced with would require a multi-pronged approach, involving social, political, and economic considerations.
He urged the government to come out clean on whether fuel subsidies have been removed entirely or partially, adding that the regulatory agencies in the oil and gas sector should let Nigerians know what quantity of fuel is consumed locally in Nigeria.
“We should implement the Petroleum Industry Act (PIA) to support a fully deregulated oil and gas sector. This will reduce the uncertainties and irregularities in the sector, enhance the sanctity of contracts, and attract foreign investments.
“We have always recommended that saved subsidy funds should be invested in building infrastructure that can cushion the impact of a tightening economy.”
Idahosa recalled that the chamber has consistently recommended the need for fiscal stimulus and non-cash interventions to cushion the burdens unleashed through the tight monetary stance of the government in the past 18 months.
“In the situation we find ourselves in, we urge the government to stay focused and more vigorous regarding the ongoing interventions like the removal of some taxes, the transition to Compressed Natural Gas (CNG) mobility, the Crude for Naira scheme, and the suspension of some import duties. The CNG mobility initiative must be supported with CNG refuelling stations nationwide and credit facilities to support quick conversion and usage,” Idahosa said.
He also recommended pegging import duties at an exchange rate of N1,000 per Dollar to provide much-needed fiscal stimulus. He argued that this would stabilise costs for manufacturers who rely on imports, boost productivity, and enable long-term planning.
On his part, Director, Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, expressed pain that the country was witnessing a resurgence of high inflationary pressures after a few months of respite despite policy measures to tame inflation, especially on the monetary side.
Yusuf lamented that purchasing power had continued to plunge over the past few months and that the situation had been further exacerbated by the surging petrol price, suggesting that tackling inflation requires urgent government intervention to address the challenges inhibiting production, productivity, and security in the economy.
“The real sector of the economy needs to be incentivized to reduce production costs. “After a few months of deceleration, the inflation numbers have returned to a spiralling path. Headline inflation rose to 32.7% in September 2024 as against 32.15% in August 2024, an increase of 0.55%.”
He explained that the reality is that the dynamics driving inflation are yet to be effectively subdued.
“These factors include the depreciating exchange rate, surging fuel price, rising transportation costs, logistics and supply chain challenges, high energy costs, climate change, including resultant incidents of flooding, insecurity in farming communities, and structural bottlenecks to production.
“These are largely supply-side issues. There is also the factor of seasonality of agricultural outputs which activates seasonal price surges in some food crops. Elevated inflationary pressures escalate production costs, weaken profitability, and dampen investors’ confidence.
Not many investors can transfer cost increases to their consumers. The implication is that manufacturers and other investors are taking a big hit resulting from erosion of profit margins due to consumer resistance and weak purchasing power.”
He advised that the government needs to offer concessionary import duty on intermediate products for industrialists, as the effects of high energy costs and exchange rate on inflation are quite significant.
“It will be very difficult to tame inflation if we do not substantially fix power, logistics, forex, and security issues. Regrettably, there are no quick fixes in these areas. But it is important to prioritise these issues and drive accelerated progress with the right strategies.
“Hopefully, the proposed economic stabilisation measures embodied in a bill currently before the National Assembly would substantially address these concerns from the fiscal side.”
The CPPE boss further pointed out that the sub-nationals have critical roles to play in mitigating the challenge of food insecurity and food inflation, as they are closer to the stakeholders in the agricultural and food value chain and better placed to impact agricultural productivity.
“The provision of rural roads by the states is also very critical to reduce transportation costs and ease access to markets.”
