‘Insecurity, inflation heightening uncertainty, poor FDIs inflow’

Notwithstanding some economic recovery recorded by the government, some private sector operators have expressed concerns that the economy continues to face headwinds triggered by high inflationary pressure, currency depreciation, insecurity and other structural constraints undermining productivity.

According to an economist and chief executive officer, Centre for Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, many businesses are grappling to survive the economic shocks and vulnerability, while inflationary pressures equally remain a key concern.

In its business environment update, the CPPE stated that the biggest challenge reported by investors across all sectors in the past couple of months was around foreign exchange.

“Practically all investors expressed serious concerns over this predicament. The concerns were around the sharp depreciation in the exchange rate, the uncertainty, volatility and unpredictability of the rate and the liquidity problem in the official window of the foreign exchange market.

“Although the inflation rate has decelerated over the past couple of months, inflationary pressure remains a major cause for concern for investors in the Nigerian economy.

“Headline inflation as of September was 16.63 per cent, while food inflation was 19.57 per cent and core inflation was 13.74 per cent. In all of these, there are worries about the implication of the inflationary situation for the Nigerian economy.

“In the period under review, inflation escalated production cost and operating cost for businesses, weakened purchasing power, depressed sales, turnover, and profits of businesses, while the high food inflation aggravated poverty and social tension.

“The key drivers of inflation were exchange rate depreciation, the illiquidity in the foreign exchange market, insecurity in the farming communities and structural constraints impacting negatively on productivity in the economy,” he added.

While other countries are showing readiness in terms of operationality of the African Continental Free Trade Agreement (AfCFTA), Yusuf noted that onboarding traction in Nigeria remains weak, raising uncertainty concerns for operators, almost a year after.

With a weak purchasing power, the CPPE boss stated that industrialists are worried about the looming imposition of excise duty on a segment of the sector, adding that the cost of distribution of finished goods and raw materials have become prohibitive because of the sharp increases in the cost of diesel and the state of the roads.

Additionally, he said delivery vehicles of many companies still suffer the challenges of multiple taxation across the country, especially on the roads, even though the taxes are imposed from state to state.

Similarly, the national president, Association of Small Business Owners of Nigeria (ASBON), Dr Femi Egbesola, said there’s a huge economic challenge as a lot of companies cannot meet up with the operating cost and overhead cost of running their businesses, which is largely due to the inflationary pressures in the economy.

He said that a lot of companies had to cut down on operating cost and daily maintenance services to be able to regulate the pressures coming out of the foreign exchange market.