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‘Obsession for revenue generation hurting Nigeria’s trade growth’

By Femi Adekoya
12 October 2022   |   4:02 am
Nigeria’s current obsession for revenue generation is hurting the international trade processes and impacting adversely on domestic and foreign investment, as well as its capacity to improve its earnings, the Centre for the Promotion of Private Enterprises (CPPE) has warned.

Aerial view of Lagos port.

Nigeria’s current obsession for revenue generation is hurting the international trade processes and impacting adversely on domestic and foreign investment, as well as its capacity to improve its earnings, the Centre for the Promotion of Private Enterprises (CPPE) has warned.

According to the CPPE, the orientation of the Nigeria Customs Service, Nigerian Ports Authority, the shipping companies and the terminal operators as well as the security agencies at the ports need to change in favour of an investment friendly international trade processes if the country will benefit from international trade.

The CPPE equally argued for institutional reforms to ensure that regulatory institutions have better disposition to support the growth of investment and focus less on the generation of revenue.

The Chief Executive Officer, CPPE, Dr. Muda Yusuf, while reviewing the country’s economy on the occasion of her 62nd independence anniversary, warned that the fragile macroeconomic conditions remain a major cause for concern.

“The troubling macroeconomic situation have manifested in the following ways in recent years: weak and depreciating currency, high inflationary pressure, high and rising debt profile, exchange rate volatility, liquidity crisis in the foreign exchange market, increasing fiscal deficit, growing debt service burden, and the acceleration of money supply growth following the rising CBN financing of deficit.” he observed.

According to him, there are profound concerns around investment climate issues. High infrastructure deficit, cargo clearing challenges which have continued to worsen, high transaction costs at the ports, weak productivity in the real sector largely as a result of infrastructure conditions, regulatory challenges and policy inconsistency.

He further said that the state of insecurity continues to take its toll on the economy, especially on agricultural output and fueling food inflation, adding, “It is also impacting the confidence of investors. The spate oil theft and the associated leakages of government revenue is very troubling. Billions of dollars have been lost to this apparent failure of security effectiveness in the oil producing areas.”

Taking a peep into the performance of the economy, he said, Over the past six decades the Nigerian economy has transformed from a basically agrarian economy to an economy driven largely by services and oil and gas.

“While the agricultural sector contributed an estimated 60 per cent to the country’s GDP in the sixties, its contribution has reduced to about 26 per cent presently.”

He said the services sector has grown significantly since independence and now contributes over 56% of the country’s GDP. These are indications of a significant structural change in the Nigerian economy since independence. The services sector contribution to employment generation and revenue to the government has risen sharply over time.

However, he said that the challenge of creating an inclusive growth trajectory remains a major concern, stressing that, “While the economy had experienced some positive growth trend over the past six decades, especially in the oil boom era, the impact of poverty, inequality and job creation has been very minimal. This is what is characterized as growth without development.”

Going forward, Yusuf said there is a need for urgent steps to be taken to ensure a better macroeconomic management framework to stabilise the exchange rate, eradicate the challenge of illiquidity in the foreign exchange market and to stem the current depreciation of the Naira.

He said it has become imperative to have urgent reforms in the foreign exchange market with greater focus on supply side strategy adding, “There is a need to review the current disproportionate emphasis on demand management of the foreign exchange market. Strengthen strategies to attract private sector capital to compliment government financing of infrastructure.”

He also called for reduction on the level of debt financing, especially the reliance on commercial debt to fund government operations, stating that public debt is already at an unsustainable threshold.

Yusuf further advised that steps should be taken to attract foreign exchange through a strategy of ensuring new investment opportunities to stimulate foreign capital inflows into the economy. We should be seeking more equity capital than debt capital.

Going further he said, “There is Need to review the country’s trade policy to support investment growth and investment sustainability. Tax policy must support investment not become a disincentive to investment.

“The security situation which has continued to deteriorate needs to be urgently addressed in order to mitigate the effects on investors’ confidence. There should be greater emphasis on quality intelligence in the war against terrorism.”