Almona: Nigeria's Twin-crises are Low Revenue, High Debt Servicing – THISDAY Newspapers
The newly appointed Director General of the Lagos Chamber of Commerce and Industry (LCCI), Dr. Chinyere Almona, was unveiled to the press recently. She used the occasion to share her views on various issues on the Nigeria’s economy. Dike Onwuamaeze brings the excerpts:
What is your view about the economic outlook of Nigeria?
The outlook looks good but with concerns about insecurity, FX scarcity, unemployment and double-digit inflation. Ongoing reforms should be concluded on good notes to improve the ease of doing business in Nigeria. Growth prospects are high but can be disrupted by insecurity, logistics challenges, difficulties in sourcing FX, etc. We need to pay attention on the growth and job-rich sectors like agriculture, construction, trade, entertainment, and technology.
What is the LCCI’s view on the e-currency the Central Bank of Nigeria is about to issue?
It is imperative that digital platforms need to be well supported and regulated to reduce cybercrimes. Since innovative digital solutions will continue to dominate the way business is done across the globe, Nigeria cannot afford to lag behind in the scheme of things. It is however important that strict regulation according to best practices are put in place. It is imperative that digital platforms need to be well supported and regulated to reduce cybercrimes. It is however important that strict regulations according to best practices are put in place. Again, we urge that the best model of regulation that will boost business transactions and not ones that will stifle players in that sector. Regulation should work towards achieving cybersecurity and protecting transactions from frauds and hacking.
How can the federal government boost revenue seeing that investments are dwindling, oil demand is dropping?
We made a recommendation recently to both state and federal government on how we can package our state and national assets to attract equity investments that can raise revenues for government instead of borrowing. This recommendation is not about selling our national assets but to commercialise them without losing them to outright sale. We can also widen the tax net to capture more tax bases and activities.
How will Nigeria be able to fully maximize the benefits AfCFTA? The African Continental Free Trade Area’s agreement has not taken off operationally even though the agreements and articles have been agreed on by the participating countries. There are still administrative hurdles to be resolved for it to take off effectively. While we wait on that, Nigeria needs to support businesses with infrastructure in order to produce domestically at competitive prices in the continent wide market. Presently, Nigeria is experiencing a disturbing cost-push
How will the rising wave of insecurity in the country affect Nigeria’s participation in the AfCFTA? The rising wave of insecurity is already a critical factor driving up inflation rate in Nigeria. The implication is that, if unchecked, products from Nigeria may not be able to compete well on price in the international markets. The cost of production in Nigeria is comparably higher than that of most African nations that will also supply products to the same large continental market.
How can MSMEs and small scale industrialists tap into the opportunities inherent in the AFCTA agreement? First they must build capacity in understanding the rules, opportunities, procedures and financing options available for traded expansion through the AfCFTA. Secondly, government must create an enabling environment by curbing the menace of insecurity that has made it difficult for business to access to raw materials for production. If our SMEs produce at higher costs, their products will not compete well at the international markets. Thirdly, there should be dedicated funding for targeted sectors where SMEs operate to empower more SMEs to scale up to meet international standards. Fourthly, SMEs require support in packaging and marketing to the whole world.
What are the implications of the rising debt profile of the federal government?
The federal government spent N2.02 trillion on debt servicing in the first half 2021. This figure represents 90.58 per cent of the total revenue of N2.23 trillion generated by the federal government within the period; a development that signified a dangerous trend for the economy. An overview of FGN 2022 Budget call circular showed that as of June 2021, the federal government’s retained revenue was N2.23 trillion, which is 67.58 per cent of the target of N3.3 trillion for the review period. This means that the federal government failed to realise N1.07 trillion of its revenue target in the first half of the year. There is a twin-crisis of low revenue and high debt servicing.
Many have said that Nigeria’s problem is more of spending problem than revenue generation. How can these challenges be addressed?
There should be more compliance with revenue collection procedures at all levels so that all applicable payments will go into government’s Treasury Single Account. Recently, we have heard of cases of leakages in government MDAs and how they appropriate revenues they collected for their expenditures beyond budgetary provisions and approvals. We both have issues with controlling out spending and generating more funds. If we succeed more with our fight against corruption, then the spending problem may reduce.
What are the likely effects of the stance of the Lagos and Rivers States that they will be collecting VAT from businesses in their respective states? The decision on who collects VAT rests on the judiciary. And with the recent judgment on stay of execution of the earlier judgment, a status quo is expected by all parties pending when the appeal is resolved at the Court of Appeal. What it means is that the states cannot collect VAT now until the FIRS suit at the Court of Appeal is resolved. We have advised that the sharing formula for the states and local governments be reviewed such that states that generate more VAT revenues will receive more. This will encourage states to become more serious about the business environment in their states and how companies are supported to thrive.
What are the implications of incessant hike in electricity tariff on businesses in particular and the economy in general?
For us what matters most is the availability of electricity to power our homes, industries and offices. Comparably, the cost of providing diesel for industries is likely higher than electricity supply from the national grid. Secondly, the most sustainable way into the future on this supply of power is the transition to renewable energy sources. Also take note that the power sector needs to implement an effective pricing that can attract investors into that sector. If the pricing is not attractive, we may remain stuck with the little investment in the sector that is not enough to boost power generation and distribution in Nigeria.
What is LCCI’s position on the implementation of the FIRS Tax Appeal Practice Direction by the Chief Judge of the Federal High Court, which compels companies to pay 50 per cent of assessed tax to FIRS before any appeal to contest the assessment is allowed to proceed? Definitely, most businesses in the private sector will practically collapse based on this judgment. We have always advocated that Nigeria’s tax administration should follow international best practices, deploy more technology to reduce human interface, and the tax net should be widened instead of over taxing the current tax players with higher rate or more taxes.
Is the LCCI worried about the takeover of Nigerian businesses by AMCON to recover their debts? The AMCON Act empowers it to take possession, manage, or sell all properties traced to debtors, whether or not such assets or properties have been used as collateral in obtaining the loans. The agency can manage the collection of debts in such ways that will not destroy the business empires and jobs. Except in cases where the indebted companies are already dead, AMCON should do due diligence on the companies and appoint sound management to turn them around for survival and not liquidation. The objective should be reviving the companies, recover the debts with applicable interests and handover to owners. Most of what we have seen has been outright liquidation and difficulty in disposing assets at good prices.
How can the real estate and construction sector contribution to the GDP be improved? Construction sector attracted $1.5million capital importation in Q1 2021. Data from the NBS showed that the real estate sector’s contribution to nominal GDP in Q2 2021 stood at 5.05 per cent as against 5.41 per cent recorded in the second quarter of 2020, but slightly higher than the 5.03 per cent it accounted for in the first quarter of 2021. These are good results and shows resilience of the sectors. These sectors have high capacity in job creation. Property and land documentation should be regulated with international best practices that protect the rights of property owners. Nigeria needs to improve on the registering property indicator of the Ease of Doing Business Ranking by the World Bank. Registering property and land documentation should be more transparent and easy as a way of attracting more foreign and local investments.
What’s your view on the current exchange rate management strategy by Central Bank of Nigeria (CBN)?
The CBN has consistently tried to boost the supply of FX to keep the FX market liquid. But we have a case where the supply does not meet the demand and this has put persistent pressures on the Naira leading to its weak position against major currencies. Many businesses now source their FX needs from parallel markets at above N525/$. We need to boost the supply side of the FX market through more inflows from exports, diaspora remittances and crude revenues.
Government has said it wants to revive the Shea Industry. How should they tackle this revival?
We have always advocated that we should not export primary products but that we should process and add value before we export them as finished products. If the non-oil export sector will generate more revenue and forex inflow especially, agro-industrial revolution is required to transform our agriculture sector.
The challenges with budget design and implementation have remained a recurring issue. What do you think is the way forward, especially now that deficit financing appears to be the trend? Beyond the politics and economics of budget preparations and passage, there is need for due diligence in the preparation of budget estimates by MDAs and more monitoring and supervision when budget. At the point of preparation, there should be more consultations with relevant stakeholders who can provide facts and figures that are critical to having a good fit aggregate for a national or state budget.Beyond passage, there should be strict compliance with budgetary provisions and approvals and well supported with a dedicated monitoring and evaluation system.
To what extent has the e-callup system introduced by Lagos State in collaboration with NPA, eased operations at the Lagos Ports?
We believe that the major challenges we have with clearing goods from the ports and delivering to warehouses in Lagos are more operational bottlenecks caused by excessive procedures, duplication of functions, and weak infrastructural support. Businesses are losing huge human and financial resources through the loss of goods through spoilage, demurrage, and extortions along the procedural chain of clearing their goods from the ports. Our customs operations need to be reformed with reduced human interface and full automation of port operations. When these are done the clearing of goods at the ports will likely improve. The e-Callup has not achieved much according to stakeholders in Lagos ports. We urge the government to attend to the roads around the ports, establish a functional rail system connecting the ports to strategic locations. As long as we have the bottlenecks around the ports, the e-Callup may not be as effective as expected.
Corruption, hooliganism is still thriving at the ports and parking bay, what do you consider a way out?
We need to automate most of the operations at the ports to reduce human interface in order to reduce corruption and hooliganism at our ports.