•Says issues of fuel subsidy, unemployment, poverty, others‘ll still top
By Victor Ahiuma-Young
In this piece, the Director-General of Nigeria Employers’ Consultative Association, NECA, Wale-Smatt Oyerinde, reviewed year 2022 and expectations for 2023, declaring that while 2022 was a terrible year for business, things may not change for better in 2023
Business issues of 2022
The year 2022 was quite unique in view of the many issues that characterized it. Some of these issues were local in nature and peculiar to Nigeria, while others were global, with dire consequences for us as a nation. As the nation struggled to recover from the COVID-19 pandemic which inflicted leadership and sustainability challenges across the globe, businesses were forced to operate under excruciating circumstances, made worse by inherent systemic contradictions.
Firstly, the Russia-Ukraine war changed the narratives from recovery from the COVID-19 effects to sustainability, in view of the consequential effects of the War. The needless war caused a major increase in the cost of energy across the world, with Europe greatly affected.
The war also heightened the disruption in global value chain which further compromised business sustainability. The impact of the war on energy and food distribution remained a concern for not only businesses but also global leaders.
Furthermore, the withdrawal of liquidity in the world economy prompted the increase in interest rates and theconsequential effect on nations with high debts, including Nigeria. It can be rightly adduced that the war has further deepened the level of poverty and caused a spike in inflation rate.
Comparatively and according to the Economic Intelligence Unit, EIU, and other expert sources, year 2022 was more tepid than 2021.
The GDP growth rate was 2.9 percent as against 3.6 percent in 2021; average power output (MWh/h) was 4.735 as against 4.559 in 2021; average inflation rate, 16.5 percent against 11.5 percent in 2021; unemployment rate was 35.5 percent against the 2021 figure of 33 percent; average oil production rate (mbpd) of 1.21mbpd against the 2021 figure of 1.67mbpd; external reserve of about US$36.9billion as against US$40.5billion in 2021, among many other indices.
Beyond Russian, Ukraine war
Some of the other issues that Organized Businesses struggled with included energy cost, multiplicity of taxes, unavailability of FOREX for productive endeavours, insecurity, spiraling inflation, rising debt stock of Government and many others.
At the close of year 2022, businesses had spent over US$22 Billion on alternative energy sources. The price of diesel reduced from an average month-on-month retail price of N289.37 in December, 2021 to N288.09 per litre in January 2022, indicating a decline of 0.44 percent. However, as at December, 2022, the price had skyrocketed to over N800 per litre. While many organizations finalized their operating budget based on the estimated diesel cost of about N288 per litre, they were operationally compelled to spend over 500 percent over the budged amount.
The paucity of Government revenue ascribed to the increasing oil theft, unabated subsidy scam (and the consequential humongous amount being wasted annually) and the seeming confusion of the Monetary and Fiscal Policy Authorities further created different shocks at the Foreign Exchange Market, with the business community bearing the brunt of the uncoordinated and sometimes ambiguous policy options.
In September, 2022, Nigeria’s crude oil production crashed by about 24.73 percent to 937,766 barrels per day, compared to 1.246 million barrels per day recorded at the same time in 2021. Our inability to meet the OPEC quota due to inherent contradictions in the system caused the Nation to lose over US$2 Billion to oil theft between January and August 2022. The revenue ordinarily would have supported the country’s fiscal deficits and budget implementation, while also making FOREX available for critical business needs.
Also, important to note among the challenges faced by businesses in 2022 were the unabated insecurity, regulatory gangsterism and, the massive migration of young and talented youths to Europe, America and Asia in search of greener pastures.
Although it is expected that regulators and legislators would play the role of business facilitators and promoters, businesses witnessed an upsurge in the bottlenecks created by some regulators and different committees of the National Assembly. For example, there was an increase in the incessant summon of business leaders under the guise of oversight functions based on Sections 88 and 89 of the Constitution. The summons was not only distractive; it also served as a clog in the wheel of economic development. Constitutionally, legislators are to make laws, agencies of the executive are to implement and the judiciary are to interpret the Laws. It becomes an anomaly when the legislators make laws and at the same time decides to implement or interpret such laws under any guise.
Multiplicity of taxes, fees, levis
It will not be totally out of place to say that this government would be leaving a legacy of taxes, levies and fees for the Organized Private Sector, OPS. The quantum and rate of taxing organized businesses has been quite unprecedented in the last few years. At the last count, organized businesses were made to pay over 50 different taxes, levies and fees (both legally and illegally). These taxes included Company Income Tax, Stamp Duties, Petroleum Profit Tax, Capital Gains Tax, Value Added Tax, Personal Income Tax, Withholding tax, Tertiary Education Tax, one percent of payroll contribution to NSITF, 10 percent of Payroll contribution to National Pension Commission, PenCom, one percent of payroll Industrial Training Fund, ITF, Levy, National Information Development Levy, Cabotage Levy, Radio and TV Licenses, Police Special Trust Fund Tax Levy, Niger-Delta Development Commission Levy, National Agency for Science and Engineering Infrastructure levy, Land Use Charge, Parking Fee, Consumption Tax, Road Tax, Standard Organization of Nigeria Fees, Nigeria Content Development Levy, NAFDAC Levy, Nigeria Health Insurance Authority contribution, Signage Fees, Etc.
Not all gloom, doom
Absolutely not, there were many bright spots in 2022. Some of the highlights included the strides of ITF-NECA Technical Skills Development Project, TSDP. The Project, a model Public-Private-Partnership in the development of critical skills for industrial development started over ten years ago. In 2022 alone, not withstanding its constraints, the Project graduated over ten thousand skills manpower. This effort is in furtherance of the fulfillment of the mandate of the Industrial Training Fund, ITF, and NECA, being the Voice of Business in Nigeria. The Project frontally contributed to the reduction of the increasing rate of unemployment with the social consequences.
Also of note is the passage of the National Health Insurance Act, which made health insurance compulsory for all Nigerians and the renewed efforts to curb oil theft, which was better late than never was also a bright spot. design and formulation process will serve the nation better, going forward.
The protracted ASUU strike, which caused a major gloom in the education sector, was also resolved. It should be noted that education remains the bedrock of any nation’s development. Thus, the resolution of the crisis should be celebrated and commended. Notwithstanding the many glitches between the fiscal and monetary authorities, we note the efforts at stabilizing the Naira and achieve other macroeconomic growth. Our concern remained the seeming non-consultative approach of these Authorities. As critical stakeholders in the Nigeria-Project, we urge that more effort should be made to involve the OPS in the process of Policy formulation, implementation and evaluation.
Issues of concerns in 2023
As we progress into year 2023, it is imperative that the outgoing Government does all within its powers to ensure some level of stability in the Polity. The efforts at reducing oil theft should be stepped up. It is important that the Government should take a second look at the challenges of the multiplicity of taxes and introduction of new ones. It will be counter-productive to continue to increase taxes and invariably burden many businesses out of existence. While we cannot control global events that affect us, we can do well to resolve the many contradictions inherent in our polity.
In 2023, the ripple effects of the Russia-Ukraine war will continue to be felt, global money tightening will continue with consequential effects on Nigeria and other struggling economies, energy challenges will continue in Europe with Russia weaponizing gas and food supply, the removal of fuel subsidy in Nigeria could trigger protest from organized labour even as the purchasing power of average Nigerians continue to dwindle due to increasing inflation and high unemployment rate. It is also expected that businesses will face more challenges as the quest for sustainability and not competitiveness continues.
On policy recommendations for the incoming Government, we propose that the incoming Government must demonstrate strong political will and nationalistic zeal to not only unravel the misery surrounding the fuel subsidy, on which over N4 trillion was expended in 2022, but also name and prosecute those found to have deprived the nation of huge developmental funds. The next government’s priorities should include ensuring macroeconomic growth and stability; getting the nation’s refineries to work and removal of the fuel subsidy; ensure a fair and just system of taxation, which must include the harmonization of all taxes across the Federation; alignment of the Fiscal, Monetary and Trade policies to stimulate growth and increase investor’s confidence; review the national security architecture as this will have a ripple effect from a reduction in the loss of lives, high cost of transportation, food inflation among others.
It was reported that one of the Electricity Distribution Companies lost over N30Billion to vandalism.; give more attention to trade and non-oil exports as alternative for Foreign Exchange earnings; develop a more robust monetary policy to defend and increase the value of the Naira, be deliberate in creating plans to reduce the bourgeoning debt profile; facilitate a more conducive environment for businesses and ensure an all-inclusive growth across all sectors of the economy.
While it is obvious that the road ahead will not be easy, it is expected that the current Government will refocus its energies at ensuring economic stability and create a foundation for economic renaissance, post May, 2023.
Structurally, the nation is dealing with a multi-facet economic challenge and lack of competitiveness in our manufacturing industry. As we deepen our participation in the Africa Continental Free Trade Area Agreement, AfCFTA, we cannot but enable the Real sector of the economy to stabilize in order to be able to compete at the African trade market. Not doing so will sound the death knell for Nigerian businesses and expose the economy to dire consequences.
The incoming Government must be bipartisan and decisive in addressing the myriad of challenges that presently stifle the growth of Businesses, and invariably national development. The challenges are huge, but with the right policies and people at the helm of different Ministries, Departments and Agencies, and with close collaboration and partnership with the Organized Private Sector in policy design, implementation and monitoring, these challenges are surmountable.
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