‘Brace up for inflation, unemployment, debt burden’ - NECA

The Nigeria Employers’ Consultative Association (NECA) believes that the Federal Government will be leaving a legacy of multiple taxes, unemployment, high inflation, debt burden, economic crisis for the incoming government. It says that these will constitute big challenges for the next government. TOBA AGBOOLA reports.

As the nation struggled to recover from the COVID-19 pandemic, which inflicted leadership and sustainability challenges across the globe, businesses were forced to operate under a very tight and unfavourable environment, made worse by systemic contradictions.

The Nigeria Employers’ Consultative Association (NECA) said while last year was a terrible for business, things might not change in the year.

In his review of last year and expectation for the year, the Director-General of NECA, Mr Wale-Smatt Oyerinde, said the Russia-Ukraine war changed the narratives from recovery from the COVID-19 effects to sustainability, in view of the consequential effects of the war. He said the needless war caused a major increase in the cost of energy across the world, with Europe greatly affected.

The war, according to NECA, also heightened the disruption in global value chain, which further compromised business sustainability. The impact of the war on energy and food distribution remained a concern for not only businesses but also global leaders.

Furthermore, NECA said the withdrawal of liquidity in the world economy prompted the increase in interest rates and the consequential effect on nations with high debts, including Nigeria. It could be adduced that the war had further deepened the level of poverty and caused a spike in inflation rate, Oyerinde said.

2023 Budget

NECA expressed concerns over the 2023 National Budget, saying poverty, unemployment, rising debt profile, and others were not likely to change as President Muhammadu Buhari signs the N9.73 trillion Appropriation Bill to Law.

The umbrella body for employers and voice of the business community said it was imperative for the government to mobilise and strengthen revenue sources to avoid financing the budget through high-interest-rate borrowing, thus increasing future debt service.The “Budget of Fiscal Sustainability and Transition” was designed to achieve, among other things, the strategic objectives of the National Development Plan 2021–2025.

“With estimated N9.73 trillion and N21.83 trillion budgeted as revenue and expenditure and a fiscal deficit provision of N12.1 trillion, the budget is ambitious while there are concerns about its basic fundamentals. The ‘rushed’ passage of the budget by the National Assembly calls for concern as this could not have enabled the wide consultation of critical stakeholders whose input would have added value to the budget proposal,’’ Oyerinde said.

Oil price

The US$75 per barrel oil price assumption for the year looks realistic, given that the commodity averaged $99pb in 2022 even as OPEC+ remains fixated on regulating oil production to stabilise energy prices.

However, global recession fears in 2023 could dampen oil demand with an adverse effect on prices. The oil production benchmark of 1.69 million/barrels per day also seems somewhat ambitious.

The combination of factors such as large-scale oil theft, frequent shut-ins, vandalism, and International Oil Companies’ (IOCs’) divestment have continued to depress oil production in 2022.

Other challenges hindering businesses to create jobs

NECA said it would not be out of place to say that this government would be leaving a legacy of taxes, levies and fees for the Organised Private Sector (OPS).

”The quantum and rate of taxing organised businesses has been quite unprecedented in the last few years.

“At the last count, organised businesses were made to pay over 50 various taxes, levies and fees (both legally and illegally). To further burden the already over-burdened organised businesses, the National Assembly passed the Finance Bill, increasing the Tertiary Education Tax (TET) rate from 2.5 per cent to three per cent. It is worrisome that an increase was implemented in 2021 through the Finance Act 2021.

“This singular increase effectively raised the Corporate Income Tax (CIT) to about 36 per cent, which undoubtedly, comparatively, is one of the highest rates in the world. All these not only created enormous challenges for businesses, they also hindered them from maximising their full capacity to create jobs and wealth.

“As we progress into the year, the outgoing government must all within its powers to ensure some level of stability in the polity. The efforts at reducing oil theft should be stepped up. The government must take a second look at the challenges of the multiplicity of taxes and the introduction of new ones. It will be counter-productive to continue to increase taxes and invariably burden many businesses out of existence. While we cannot control global events that affect us, we can do well to resolve the many contradictions inherent in our polity. In 2023, the ripple effects of the Russia-Ukraine war will continue to be felt as global fiscal tightening will continue with consequential effects on Nigeria and other struggling economies.

“Energy challenges will continue in Europe with Russia weaponising gas and food supply. The removal of fuel subsidy in Nigeria could trigger protest from organised labour even as the purchasing power of average Nigerians continue to dwindle due to increasing inflation and high unemployment rate. It is also expected that businesses will face more challenges as the quest for sustainability and not competitiveness continues.

“The incoming government must be bipartisan and decisive in addressing the myriad of challenges that stifle the growth of businesses and, invariably, national development. The challenges are huge, but with the right policies and people at the helm of various Ministries, Departments and Agencies (MDAs) and with collaboration with the OPS in policy design, implementation and monitoring, these challenges are surmountable.

“With the National Bureau of Statistics reporting over 33.3 per cent unemployment rate and over 63 per cent of persons living within Nigeria, and about 133 million people multi-dimensionally poor, the best that any government can do is to facilitate a favourable environment for businesses to thrive.”

Subsidy scam

NECA charged the Federal Government to unravel the scam surrounding fuel subsidy and unveil a plan to remove it.

“It was distressing to witness long queues in filling stations across the country when the government claimed to have paid trillions in petrol subsidy.

“The government has to stop making a mockery of the country and the citizens. Notwithstanding the subsidy payment, Nigerians are still compelled to endure long queues to buy it at almost a black market rate, fuelling inflation and economic hardship.”

Issues of concerns in 2023

Oyerinde continued: “As we progress in year, it is imperative that the outgoing government does all within its powers to ensure some level of stability in the polity. The efforts at reducing oil theft should be stepped up. It is important that the government should take a second look at the challenges of the multiplicity of taxes and introduction of new ones. It will be counter-productive to continue to increase taxes and invariably burden many businesses out of existence. While we cannot control global events that affect us, we can do well to resolve the many contradictions inherent in our polity.

“In 2023, the ripple effects of the Russia-Ukraine war will continue to be felt, global money tightening will continue with consequential effects on Nigeria and other struggling economies, energy challenges will continue in Europe with Russia weaponising gas and food supply, the removal of fuel subsidy in Nigeria could trigger protest from organised labour even as the purchasing power of average Nigerians continue to dwindle due to increasing inflation and high unemployment rate. It is also expected that businesses will face more challenges as the quest for sustainability and not competitiveness continues.”

Ways out

Oyerinde added: “On policy recommendations for the incoming government, we propose that the incoming government must demonstrate strong political will and nationalistic zeal to not only unravel the misery surrounding the fuel subsidy, on which over N4 trillion was expended in 2022, but also name and prosecute those found to have deprived the nation of huge developmental funds.

“The next government’s priorities should include ensuring macroeconomic growth and stability; getting the nation’s refineries to work and removal of the fuel subsidy; ensure a fair and just system of taxation, which must include the harmonisation of taxes across the Federation; alignment of the Fiscal, Monetary and Trade policies to stimulate growth and increase investor’s confidence; review the national security architecture as this will have a ripple effect from a reduction in the loss of lives, high cost of transportation, food inflation, among others.

“It was reported that one of the Electricity Distribution Companies lost over N30billion to vandalism, give more attention to trade and non-oil exports as alternative for Foreign Exchange earnings, develop a more robust monetary policy to defend and increase the value of the Naira, be deliberate in creating plans to reduce the bourgeoning debt profile; facilitate a more conducive environment for businesses and ensure an all-inclusive growth across sectors.

“While it is obvious that the road ahead will not be easy, it is expected that the government will refocus at ensuring economic stability and create a foundation for economic renaissance, post-May 2023.

“Structurally, the nation is dealing with a multi-facet economic challenge and lack of competitiveness in our manufacturing industry. As we deepen our participation in the Africa Continental Free Trade Area Agreement (AfCFTA), we cannot, but enable the real sector of the economy to stabilise to be able to compete at the African trade market. Not doing so will sound the death knell for Nigerian businesses and expose the economy to dire consequences. The incoming government must be bipartisan and decisive in addressing the myriad of challenges that presently stifle the growth of businesses, and invariably national development.

“The challenges are huge, but with the right policies and people at the helm of different Ministries, Departments and Agencies, and with close collaboration and partnership with the OPS in policy design, implementation and monitoring, these challenges are surmountable.”