The administration of President Muhammadu Buhari had promised to fix the current challenges bedeviling the economic, political and social landscape of the nation through its national economic recovery plan amidst unending rise in inflation, coupled with unhealthy business climate.
The 2016 budget voted 30% for capital expenditure yet the nation’s electricity supply has not improved, the roads are in deteriorating conditions and more than 30 million Nigerians do not have access to good housing. Above all, over 100 million out of 182 million Nigerians are living below poverty line.
With less than two months to the end of 2016, government has released below 60% of the budget to the appropriate ministries. The situation has not improved and we are far way out of the current economic conundrum.
Economic Confidential checks revealed construction workers are at home due to absence of contracts from the federal government. Where then is the money for capital projects invested?
Seventy percent of Nigerian banks have recently sacked workers while many Small and Medium Enterprises (SMEs), entrepreneurs and industries have become moribund. The business environment in Nigeria has become unattractive as a result of foreign exchange debacle. Even the local market women are claiming that high rate of dollar negatively impacted their businesses.
For instance, more than 1,500 workers of Erisco Foods Limited would join the labour market following the announcement by the President of the tomato paste factory, Eric Umeofia, the Erisco Chairman recently hinted of plans of relocating to China. He attributed the decision to the failure of the Central Bank of Nigeria (CBN) to allocate FOREX to Nigerian manufacturers to purchase needed raw materials and the intention of government and Asian importers to flood Nigerian market with substandard paste.
The World Bank ease of doing business index 2016/2017 saw the nation move a step up the ladder from its previous 170 position to 169 out of 190 countries in the ease of doing business globally.
Despite the nation’s one step movement up, evidence indicates that businesses are finding it difficult to survive in Nigeria. The country’s ease of doing business index dropped from 47.33 in 2015 to 44.69 in 2016, according to the report.
Nigeria fell behind many African countries due to lacuna in her infrastructure development particularly due to epileptic power supply and absence of clear rules and execution in the business climate of the nation.
The World Bank noted that power “is a main industry for the generation of national wealth and employment in Nigeria; however the sector is hindered by poorly exploited generation capacity, high transmission losses and frequent outages, making firms resorting to self-provision of electricity”.
The implication of irregular power supply on businesses led to increased production costs, reduced competitiveness capabilities and demand for labour. Power inadequacies have been traced to the reasons many multi-nationals left the shore of Nigeria to other African nations for their production lines and in turn exporting their finished goods to the country.
The crux of the matter is, generating sets that formed alternative sources of power is ill-affordable by businesses due to higher price of diesel. The situation no doubt cannot support the current loss suffered by entrepreneurs, expansion plans, employment and regular payment of taxes.
Vice President, Yemi Osinbajo has assured Nigerians of 7,000 megawatts of electricity before year 2016 ends. Out of ten items which indicated a nation as having reforms and policies making it easier to do business, Nigeria successfully initiated two and failed in the other eight criteria. To start a business and getting credit to do business is commendable while getting electricity, paying taxes, registering property, trading across border, enforcing contracts, protecting minority investors, dealing with construction permit and solving insolvency were challenging.
According to President Buhari, companies would not be permitted to evade taxes or get waivers anymore in the country as part of the nation’s anti-corruption fight. He said: “I want to be remembered by Nigerians as a genuine patriot who not only fought the civil war but also fought corruption to standstill. The battle against corruption has recorded some feat, as the business environment now knows that things have taken a new dimension.”
The new tax regime in the country under Babatunde Fowler, the Federal Inland Revenue Service (FIRS) head, has taken enforcement to every sector of the economy. The government also encouraged private firms to get tax incentives by fixing public facilities. A good example, the Federal Executive Council gave approval to Dangote Group to construct Obajana-Kabba road with cement and get tax incentives in return.
Economists have said the importance of taxes is immeasurable to economic growth. Minister of Finance, Mrs Kemi Adeosun told newsmen in Washington D.C after the G-24 meeting of the IMF/World Bank that all multinational firms doing business in Nigeria rarely pay their taxes. She said the two main efforts of the government to get out of the current recession is by accelerating investment in infrastructure and strategize on best method of preventing tax evasion by multinationals in the country.
Similarly, the Senate President Bukola Saraki said at the 22nd edition of the Nigerian Economic Summit that Nigeria’s corporate taxation scheme must be improved on to get the country out of the economic downturn. He said: “With 37 million small and medium scale enterprises providing about 95 per cent of our jobs, as we promote ‘Made-in-Nigeria’, we must also use our legislative powers to amend the taxation laws. To get out of this recession, we must provide a business-friendly environment.”
Analysts have pointed out that the continuous plummeting of naira due to scarcity of dollar contributed to the poor business climate in the country to a large extent. However, the CBN had insisted on developing the local industries, thereby discouraging over-dependence on imported products. This single policy has made it cumbersome for industries to get foreign exchange for imported machineries and products required in their factories.
The way out of the current poor business climate in the country is the execution of clear policies that will make business climate conducive through ensuring regular electricity supply, tax freedom for new investors, encouraging international trading, active enforcement of contracts, among others. These initiatives would help improve the business environment on the long-run. The government need to make foreign and local investors see the nation as Africa’s investment destination for all.
Apart from the struggling business environment, insecurity through kidnapping and insurgency are part of menace that drives FDI away from the country. Many of the nation’s roads are in deplorable conditions. For instance, before now, a journey from Abuja to Lagos used to take between 7 and 8 hours. Today, commuters spend between 12 and 14 hours on the road due to bad road networks. The pledge of President Muhammadu Buhari to tackle insecurity has been commended globally. However efforts have to be made to eradicate the left-over of insurgency in the north east in order to encourage more investors into the country.