Again, stakeholders in Nigeria’s Organised Private Sector (OPS) have expressed grave concerns over the skyrocketing cost of doing business, saying that they fear for their survival.

Speaking against the backdrop of the recent hike in electricity tariff nationwide and increase of the Monetary Policy Rate (MPR) by the Central Bank of Nigeria (CBN), they said these actions are set to inflict more pain on the private sector and further worsen the already challenging economic environment.

Director-General of the Manufacturers Association of Nigeria, Segun Ajayi-Kadir, regretted that President Tinubu promised to promote domestic manufacturing but government decisions in the last year have done the exact opposite. He also expressed dismay that, despite the erratic power supply in the country, electricity tariffs have skyrocketed while other alternative sources of energy employed by manufacturers have become unaffordable and unsustainable to operate. According to him, manufacturers can’t stay competitive, never mind profitable, amid the rising cost of production.

LCCI Director-General, Dr Chinyere Almona, said the tariff hike has made the cost of living and doing business in Nigeria, unbearable. She added that both decisions are compounded by the difficulty in the importation and clearing of goods at the ports and the use of frequently fluctuating import duty exchange rates makes planning difficult for businesses.

Feedback from businesses and analysts, she said, suggests that these moves will inflict severe pain on the private sector, further exacerbating the already challenging economic environment.

Almona said that the private sector, which is the primary driver of growth and employment generation in Nigeria, is currently plagued with increased borrowing costs, reduced investment incentives, heightened uncertainties in the policy environment and a pressured foreign exchange market. Adding that the recent hikes in the MPR have directly translated into higher interest rates, she said it has made it more expensive for businesses to access credit for working capital, expansion and sustainability.

“We have consistently advised that rate hikes alone will not curb inflation without resolving the challenges of the real sector of the economy. The real sector has demonstrated the capacity to create more jobs, manufacture products for consumption and export and sustain the industrial base of the economy. While we understand that high-interest rates attract Foreign Portfolio Investments (FPIs) and local investors to treasury bills and bonds, we lament the drying up of funds away from the private sector to government treasuries,” she said.

Acknowledging that the removal of the subsidy on electricity may have been in line with attracting foreign investors into the sector with a cost-reflective tariff, she said they have also advocated that Nigeria subsidises production instead of consumption. Adding that a major concern is seeing businesses pay heavily for services they do not enjoy optimally, she said it is concerning that even with a higher cost of power, companies still do not have access to the service.

“We call for an aggressive metering programme that leads to 100 percent coverage of electricity consumers. This guarantees liquidity for the distribution companies and gives more satisfaction to consumers with a feeling of paying for what they consume. Beyond the provision of infrastructure, we need to have a sound regulatory and policy environment to attract more foreign investment into the power sector,” she said.

Going further, she said it is expected that with the government having access to more funds, the huge costs borne by companies in providing business support infrastructure like power, logistics, warehousing, security and so on, must be promptly provided with saved funds from discontinued subsidies and taxes.

“For instance, the Economist Intelligence Unit, in its April Global Outlook, reported that China will be relying heavily on public investments to achieve the projected 4.7 per cent GDP growth in 2024. We are concerned that businesses will face double jeopardy in paying a higher electricity tariff and another cost in providing a private electricity supply. We urge the Federal Government to invest more in the power sector to improve the power supply to businesses and homes.”

Expressing worry over the survival of small businesses, she said small and medium-sized enterprises (SMEs) in particular, are disproportionately affected by the CBN rate hike policy and tariff hike. “Many SMEs operate on very thin profit margins and rely heavily on affordable credit to sustain their operations and drive growth. The surge in borrowing costs stifles their ability to invest in productivity-enhancing measures, hire new employees and contribute to economic growth.

“We strongly urge the CBN to reconsider its monetary policy stance and avoid further increases in interest rates. While the CBN’s objective of containing inflation and stabilising the exchange rate is commendable, it must be pursued in a manner that does not unduly hamper private sector activities and economic growth,” she said.

On the burden of importation, she urged both the CBN and customs to work together towards having a fixed import duty exchange rate that is lower than the official rate for the importation of items in critical sectors like agriculture, manufacturing, power and healthcare. This, she said, will reduce the cost burden on operators in these sectors, boost their productivity and enhance their sustainability.

“Delay in clearing goods has also come up as a major pain point for importing businesses. We can improve our import processes through automation and enhanced port infrastructure. We recommend that the CBN explore alternative policy measures that promote credit access, stimulate investment and support entrepreneurship. On metering, the government should create the needed environment where local meter manufacturers can thrive to bridge the current gap in meter deployment. This will reduce the pressure on the foreign exchange market, create jobs, generate revenue for the government, and develop local expertise in meter manufacturing,” she said.

Sharing his concern to the issue of the tariff hike, former MAN president, Apapa branch, Engineer Frank Onyebu, pointed out that tariff hikes in the past have never translated to better power supply and improved services in the past, with the current hike most likely to go the way of its predecessors.

He regretted that even though they operate out of an industrial zone, which is supposed to enjoy a good supply of electricity, the reverse has always been the case with power supply at an all-time low and the need to rely more on costlier alternative sources of energy. He said manufacturers are going to be hard hit as they are going to pay more for less.

“There are too many problems local manufacturers are dealing with every day and instead of looking for how to reduce these problems to revive the real sector, they keep adding to them instead. The cost of goods keeps going up every day and it is because the cost of production has gotten out of hand. People are getting poorer, but we cannot slash costs except we want to go out of business. Something must be done quickly to rectify this situation to save the real sector from complete collapse,” he said.