Friday, 22nd September 2023

‘Govt engagement on subsidy removal should be holistic’

By Gloria Nwafor
06 June 2023   |   4:06 am
It is quite a challenge. Fuel subsidy removal has been a contentious issue for many years and there is the need for the country to free itself from the burden of its inefficiency.

Adewale-Smatt Oyerinde

Director-General, Nigeria Employers’ Consultative Association (NECA), Adewale-Smatt Oyerinde, in this interview with GLORIA NWAFOR, spoke on the need for government to expand its subsidy removal negotiations and allow holistic engagement, as well as measures employers could adopt to reduce inflationary pressure on their workforce.

What are the demands and expectations of organised businesses in the ongoing debate on fuel subsidy removal?
It is quite a challenge. Fuel subsidy removal has been a contentious issue for many years and there is the need for the country to free itself from the burden of its inefficiency. The Appropriation Act 2023 says the subsidy will end by June and we all saw it coming. But the pronouncement of the president that  ‘subsidy is gone’, even before the end of June, creates some level of shock and panic, which has thrown the economy into where we find ourselves now.  

Fundamentally, we will reiterate that subsidy is not sustainable. The trillions of naira that the country has been paying to fund the inefficiency and consumption can be put to better use. Even as a lot of things are subsidised in other climes, the peculiarity of our kind of subsidy is quite absurd and not sustainable. We cannot continue to pay for what we are not using. The question to ask ourselves should be how many litres of Premium Motor Spirit (PMS) we are consuming daily? If we have that empirical data, it puts us in a position to quantify the quantum of waste on subsidy.
There is no reason why Nigeria will have four refineries and none is working. Something is fundamentally wrong somewhere, which government should take responsibility for. These are issues we have to take up. The Nigerian National Petroleum Company Limited  (NNPCL) came up with a price template, which has brought up different dynamics. There is inflationary pressure now and the prices of goods and services have skyrocketed. There is an urgent need for government to address that socio-economic issue through intervention and palliatives immediately. If the country is no longer funding subsidy before the end of June, the government would have maximised the opportunity of the 30 days in June to engage critical stakeholders and partners for everyone to be prepared for the realities, but that have not been done.  

For us, subsidy removal is fate accomplished, but the process of removing it is what we are not comfortable with. It would have been well managed through adequate engagement and conversations with stakeholders. On issues of palliatives, what the government is doing now is engaging labour for interventions through increases in salaries and wages or buying buses to ease transportation costs. Those are pedestrian palliatives. The focus should be on how we improve the standard of living of an average Nigerian. How do we ensure that an average Nigerian is gainfully employed, in such a way that marginal increases in contexts of prices of fuel, food or basic luxuries don’t significantly affect the individuals? That is the conversation that we should be having.   

The issue of buying buses or $800 million palliatives is short-term palliatives that are not sustainable. Once government deals with the issue from the labour side, it is also very important they start addressing the issue from the enterprise side, because businesses will need to buy input and cost of input has gone up, which automatically increases the cost of production. If the cost of production goes up, the cost of buying a unit of a product will also go up. Now the income of an average worker is already depleted by inflation. How will he buy the products whose price has been forced to go up because of the increased cost of input?    Looking at it alone from a labour perspective is not complete but from the whole perspective of the enterprise, such as how can we make local production sustainable? How can we create the environment for businesses to continue to operate so that productive activities can continue? 
Last month, the fiscal policy measures came out, green tax on plastics and so many taxes that are being paid. We are compounding the pressure on organised businesses by the consequential effect of the increase in fuel price. How do we expect businesses to succeed following the increases in tax, levies and fees? The focus should be, on creating structures that will enable the economy to grow and strengthen local production. If we don’t do that, we are just creating palliatives that at a point would be cancelled out by inflationary pressure on businesses and if businesses cannot produce, or if they produce and Nigerians cannot buy, then it creates another problem for the businesses, because you will have unsold stock, which will ultimately affect your ability to remain sustainable, which might lead to shutting down or move to other climes. Now, if you do that you will be forced to also contribute to the high level of unemployment.  
Government should not just focus on labour alone, the engagement should be holistic, so, we all find a solution that is acceptable to all Nigerians on the issue of subsidy removal. Subsidy, we believe should go but there should be more engagement between government and all Nigerians, not just labour and employers alone. We need to build a consensus around the noble idea of removing subsidy.

What measure is the private sector taking to cushion the effect and also remain in business? Are your members planning salary increases for their workers?
The announcement by the president as I mentioned earlier, raised apprehension. We have employees coming out to share their current pain. Now, we have urged all employers to be transparent and constructive in sharing challenges their business is facing with their workers. It is not the employers’ making but the inefficiency of past governments in addressing the challenges of fixing the refineries, the inefficiency of the past governments in not addressing the issue of oil theft and maximising the potential of the refineries to operate optimally.  

Ordinarily, the Organised Private Sector (OPS) should not suffer from those issues. We have advised employers to be open, show empathy to their staff and engage them constructively.  Businesses are feeling the pinch. We advised that whatever they can do in the context of innovation to address and reduce the pressure should be done. Some have said they will step up the hybrid form of work, some that have the capacity said they will support a group form of transportation for their employees, while some are ready to increase salaries and allowances. Those that can’t do it will continue to engage their employees and share perspectives within the context of their limitations. The fundamental issue is the private sector is also a victim of the pain we all feel. However, it is better to feel the pain for now so that you can benefit later. But the government must be transparent in all these processes.

Do you see this period as a critical time for the new administration to take the issue of social security coverage for the citizens at heart?
For us, we think the quantum of money that has been wasted on the inefficiency of subsidy will do this nation a lot of good yearly. Safety nets and social security issues are fundamental issues we should be looking out currently. Fixing our health system, addressing the concerns of the aged (retirees) and the most vulnerable, because the cost of medications, rents and commodities would still be impacted by the push on inflation. It goes beyond salary increases and throwing monies at the face of every problem, but taking a critical look at the gamut of how it is going to affect employers and workers and also address the issues.  

What is your take on the validity of the National Social Intervention Programme (NSIP) data being used?
I think it needs a review. The critical challenge we have in many of those intervention programmes in the safety nets is cash transfers. We have concerns with the validity of the data that is being used because the success of the safety nets in other climes is based on data. We must have verifiable data to drive that process. You want to share $800million with the most vulnerable, who is not vulnerable in this country now? How did they come about the number of people and the parameters for distribution?  Those parameters we call the vulnerable and data must be succinct and unambiguous for everybody to see. If you don’t get it right at the point of data collection to identify those that need the money, what you have done is you have only created another avenue for corruption.

What is your suggestion on how the new administration can tackle organised businesses’ challenges?
The first thing we want is the suspension of the fiscal policy measures that just came out at the tail end of the previous administration. The introduction of new taxes and increase in excise, among others, will serve as the death knell of many businesses, not only in sectors, but also in the sub-sector and across the value chain. The current realities of the inflationary pressure that we have now don’t support that policy measures now. Whatever government can do to also make life easier for Nigerians, like why can’t we revisit the issue of Value Added Tax (VAT) and address sectors in the areas of the economy that affects our daily lives and will give direct relief to all Nigerians; not just workers only. Why don’t we take that proactive step? We are going to share our perspective with government on how do to deal with these issues. We must create relief for local businesses and find a way to stimulate local production.

The government has promised to create one million jobs in the digital economy, do you see it achievable and as a solution to the country’s high unemployment rate?
It is a laudable ambition and I commend the president on the initiative. But you don’t just legislate jobs; you must have structures in place to create the jobs. For us in the private sector, rather than focus on white-collar jobs, we have a deep collaboration with an agency of government, the Industrial Training Fund (ITF), where we run a technical skill development project that will equip Nigerian youths with relevant skills that will make them be self-sufficient, rather than focusing on creating jobs, why not explore the Technical and Vocational Education and Training (TVET) option and also to complement our efforts to create more jobs. For every 10 jobs that are created globally, there is a consensus that the private sector creates at least eight or nine of them. We urged the president that in creating or establishing a framework for job creation, government should partner with the Organised Private Sector (OPS) and NECA in addressing these challenges of unemployment. We have various intervention programmes that focus on enhancing the employability of Nigerian graduates so that we can help government in achieving its objectives of creating more jobs. Whether that will be sufficient to solve the 40 per cent unemployment rate, I don’t know, but we would have started on a solid note. 

How can the new government make the economy bounce back and become viable?
We have said beyond the laudable economic plans, the critical element is the implementation. What is the framework for implementation? That is the area we will look at.  We have always opened up our doors to support government with policy options and share our perspectives on how to do it. The private sector has shown to be competent in managing these operations. The government to a large extent has not proven to be competent in managing the economy. If the government wants to drive the economy out of the woods to a trajectory of growth, it is time to deepen its engagement and partnership with the OPS in driving the plans it desires to achieve.

The National Bureau of Statistics (NBS) is planning a new methodology for labour force statistics, which is in line with the International Labour Organisation (ILO). Do you foresee high unemployment and underemployment rates reducing, what is your projection?
We commend the work that the NBS is doing. But no matter the methodology, our reality cannot change. To create jobs, one critical factor that will tell us whether our unemployment rate is reducing or not is how the industries that employs are faring. If businesses and industries are shutting down and relocating and unemployment figure is showing a positive trend, then we will question the figure, because businesses capacity utilisation is reducing and contrasting. Those that could not survive the contraction are moving to other climes, so, where is the employment coming from? It is a cause-and-effect issue. If the cause is looking positive, then the effect will also be positive and vice versa, which explains the figures that we have seen.   
However, without pre-empting the NBS, we are going to see what they are going to come out with. I am projecting between a 35 to 45 per cent unemployment rates because the reality on the ground is businesses and enterprises are struggling to survive. The massive level of de-industrialisation going on across the country is alarming. A positive outlook will be contested.