According to the NBS Q3 2022 GDP report, Nigeria’s economic growth rate decreased by 1.78% points from the 4.03% growth rate recorded in Q3 2021 and decreased by 1.29% points relative to 3.54% in Q2 2022. Is this stunted economic growth a function of policy-making or larger factors beyond our control?
Let me say that there are some things that are beyond our control; those of global dimensions, like Covid. It is beyond our control. The only control we have is how we manage it. Look at the Ukraine war too. That is totally beyond any control. This is not caused by Nigeria, but the impact of all these things affects us. Of course, the GDP for the third was less than quarter two and far less than the same quarter the year before it. But the truth here is that we have the effect of the global environment. We can see the inflation rates in Europe and America. Where we have gone wrong is that a number of policies that we have put in place are not helping the economy, and even when they put in place some good policies, implementation becomes a challenge.
You mentioned inflation. Nigeria’s inflation figures have continued to increase, despite having hit a 17-year high last year. How is this inflationary pressure affecting organised businesses?
Of course, it is very clear. When you talk about inflation, this means rising costs. The cost of things is higher. That means the cost of labour, the cost of raw materials, and the cost of services. These are the components of cost, and when the costs are rising and they are not in a position to increase their prices, that could be a challenge in terms of profitability. When inflation is very high, as is now being experienced worldwide, we now see that the cost of running businesses becomes an issue, and we cannot easily pass these costs to the consumers, and if you cannot pass this to the consumer, it means you will have lower profitability. That determines how far you can go as a company. It determines if you are able to expand your business.
Organised businesses struggled to cope with energy costs last year. What can be done to address this problem?
Regarding the issue of energy, I will put the Nigerian government, not this government alone but also past governments, at fault for what we are passing through. Apart from the issue of the Ukraine-Russia war, there are a number of things that we are doing, but the truth is that the energy costs, the main component of it is fuel. The main trouble there is that we are importing virtually everything that we are using. If past governments had put things in place to ensure that our local refineries are working, and, therefore, this crude that we send out was not sent out and was processed here as the final product, then the cost in-between would have been saved, and when the cost now comes, it is in dollars. They import in dollars. You can imagine if the last administration had been operating with refined products from here, we wouldn’t have the issue of subsidy. People are now asking questions, what is the true cost of subsidy? A number of people believe that there is a lot of corruption in the system.
Access to foreign exchange has remained a big problem for many businesses. In what ways can the government fix this issue?
The problem is multidimensional. It is an issue of supply and demand. What we are saying is that we have a lot of pressure on the demand for foreign currency. A major part of that is spent on importing fuel into the country. You can imagine the billions spent on imports. If the crude that we have was refined here, it would have been a different ball game. Apart from the issue of oil, we are too dependent on foreign products.
The pressure on foreign exchange is too much for us in this country because most of the things we do are imported. We are too import-oriented as a nation. We should develop our industries. The government should support local industries. There is no way we can do away with importation. We cannot have everything, but it shouldn’t mean that we should import everything. At a point, we were importing toothpicks. That was a disaster. We are importing toilet rolls. What are we doing? We are feeding other economies and suffering our own economy. We are providing labour and employment for others.
If the pressure for the need for foreign exchange was lowered, we wouldn’t have the incredible exchange rates we are getting. If the supply is there and not too many people put pressure on it, the price wouldn’t be a challenge. If the supply is more than the demand, what happens? The price will come down. If the supply is less than the demand, of course, the price will go up. That is the simple law of Economics.
Look at the cost of foreign education, a lot of our people, because of the collapse of the system here, are spending billions abroad on education. That is also forex, whether they get it officially or unofficially. They can’t pay in naira. I entered UNILAG in 1969. Those who went to study abroad were those who could not study in Nigeria. At that time, it wasn’t a big deal to go and study abroad because our universities were just as good as Harvard, Cambridge or Imperial. We were highly rated and most of the lecturers came from abroad. We had lecturers who came from the University of New York to lecture and go back. Some students came from other African countries to study here.
Businesses complain about being overtaxed by the government. How will the government generate revenues without over-taxing businesses?
Government can raise revenue. All over the world, government depends on revenue to survive because the government provides the environment for you to do your business. You create wealth and make money and then you pay taxes to enable them to continue providing the enabling environment because if there is chaos nobody will be able to do any business. Creating this environment requires money. Government cannot just print money. They also generate money. I was Lagos State finance commissioner about 30 years ago and I know how much work we did on revenue generation. That was in 1992.
So, the government needs money, but what we are saying is that the government is just putting pressure on the same people as opposed to bringing more people into the tax bracket. That is the major issue.
There are a lot of people who are not paying taxes but are making money in this country. So, the government should find a way of catching them. They are improving because now government banks are linked with tax authorities. So, if income comes into your account, they have a way of knowing. They should do more of that. This could be done through electronic means. So, we are saying they should not increase the tax rates all the time for the same people who are paying when there are more people who are not paying. Because if you tax them to a point, they will not be able to pay.
The government has also recently submitted a proposal to the National Assembly in which it stated its desire to restructure the loans it obtained from the CBN, a development that will further increase Nigeria’s debt profile. Is this sustainable for the economy?
We have said it before. LCCI had, in the last two to three years, talked about our debt size as a nation. Government should not see it as normal that all they can do is fall back into debt, instead of finding ways to increase revenue or protect our revenue.
We are happy about what they are doing now about oil theft. If they had done that much earlier, by now we would be in a different position from where we are today. It started happening and billions were lost. Those billions were lost to people, to Nigerians and the government was denied the revenue it needed to sustain the economy. What do we do? Let’s go and borrow and pass the burden to future Nigerians and administrations. Now they want to borrow before they go. It is a big problem. What we are saying is that government should try and protect its revenue. They should try and generate more. We are talking about tax. We can raise more taxes but the truth is that there is a lot of corruption in the system. The people in the system responsible for these taxes take some for themselves.
A lot of these things shouldn’t be happening. People are saying that this oil theft is looking like an organised crime. How can oil be leaving our waters in vessels and nobody is stopping them? And that results in the loss of billions and trillions that could have gone to the government.
