Weak naira, high-interest rate hobble profitability, says NECA

The Nigeria Employers’ Consultative Association (NECA) said the country’s macroeconomic environment has remained extremely challenging, primarily due to volatility in three critical economic indicators of exchange rate, inflation, and interest rates that have made it impossible for businesses to operate profitably.

The employers’ body said that with the official exchange rate hovering around N1,550/$1, inflation standing at 22.97 per cent, and the maximum lending rate at 30.5 per cent, the conditions have made it difficult for businesses, especially micro, small and medium enterprises (MSMEs), to achieve positive net profit.

President and Chairman of Council, NECA, Dr Ifeanyi Okoye, said this during the association’s 68th yearly general meeting in Lagos, where he commended the Central Bank of Nigeria (CBN) for its recent reforms and interventions.

He, however, called for more coordinated efforts to align forex and interest rate policies.
Noting that improvement in forex availability would strengthen the Naira, he stressed that businesses are operating under immense pressure, with high operating costs pushing up commodity prices and reducing sales, revenue, and profit margins.

Giving the performance of the economy in the year under review, which he said was marked by the continued impact of key policy decisions implemented by the government upon arrival, Okoye said the macroeconomic environment remained challenging throughout the year.

The NECA chief said the exchange rate experienced significant depreciation and volatility, inflation persisted at elevated levels, and interest rates stayed in double digits.

Despite the headwinds, he said members of the association have shown remarkable resilience, making deliberate and often difficult adjustments to their production and marketing strategies to remain afloat and adapt to the high-cost, complex operating environment.

Further highlighting its current concerns, the NECA boss raised the alarm over the growing attempts to amend the 1999 Constitution, granting oversight of private entities to the legislature, a move, he believed, undermines the principle of separation of powers.

He said granting oversight of private entities to the legislature would result in a duplication of executive responsibilities and directly conflict with the Ease of Doing Business initiative aimed at reducing the cost of doing business in the country.

Okoye lamented that the association was deeply concerned about the increasing frequency of invitations extended to its member-companies by various committees of the National Assembly, which he said are matters that fall within the jurisdiction of the executive arm of government.

The frequent summonses, Okoyo said, are disruptive and costly, causing undue financial strain for businesses. He said NECA, alongside the Organised Private Sector of Nigeria (OPSN), will continue to engage with the government to protect businesses from regulatory overreach and preserve a conducive operating environment.