Muda Yusuf is the Director-General, Lagos Chamber of Commerce and Industry. In this interview with NGOZI AMUCHE, he speaks on economic activities and how the Federal Government should sustain Nigeria’s economic recovery. Excerpts:
Nigeria was said to have technically come out of recession. What impact has it on the growth of the economy?
It has some impact to some extent. When we say Nigeria is out of recession, it is measured by the economic Gross Domestic Product of the country, in terms of negative or positive growth. For instance, when the GDP is in a positive trajectory, it is said to be out of recession. But when in the negative, it is said that the country is in recession.
But to the average Nigerian, what matters is the effect on welfare, especially lower food prices, reduced cost of healthcare, improved transportation system, constant power supply, and security of lives and property. To the average investor, it is from The Point of doing business, profit-making or revenue generation and ease of doing business. Technically, from the oil sector, when it improves, it will not have a direct impact on the people because it is not an inclusive economy. That means the increase in the oil price will not have a direct impact on the people. What is paramount here is the impact on the cost of doing business, productivity of the investors, competitiveness of firms and the sustainability of investments. Although the exit from recession is a signal that the country is growing, the Federal Government also needs to address investment and environmental issues such as power, transportation, cost of funds, foreign exchange management, tax and trade policies.
What area of reforms would you advise the Federal Government to embark upon?
The government should reform the deregulation of the downstream sector because of many leakages. Politically, it might be very difficult because of several policies. We are not able to unlock our potentials because of policy inconsistencies. This must be looked into and also, a framework for liquidity of forex market should be urgently put in place. This is critical at this time in order to restore investors’ confidence, enhance forex inflows, and boost Foreign Direct Investments and to reduce uncertainty in the economy.
The tight monetary policy regime should be relaxed to spur domestic investments and consumer’s spending. Current reforms in such critical sectors as power, agriculture, solid minerals and oil and gas should be sustained. The executive orders signed recently should be fully enforced to improve the way government does business, thereby improving the business environment.
The imperative of economic diversification cannot be over-emphasised, especially with the slump of the crude oil price at less than $40 per barrel recorded in the past. Although the Oil price is picking up, the development has profound implications for the fiscal viability of government at all levels
What is your view on the implementation level of past budgets?
The implementation levels of past budgets have been very low. But in the spirit of our democracy, we need to continuously engage the government on all aspects of governance issues, even when performance is suboptimal. The budget is a major governance instrument. It is necessary to engage on how to make it better. We could make suggestions on the implementation framework, for instance. Besides, budget statements also come with important policy components which may have implications for private sector performance. Such policies may need to be interrogated and debated in the interest of investors and the economy.
Diversification of the economy has been described as necessary; how can the federal and state governments achieve this with the cash crunch, knowing that it is not something that can be done overnight?
The imperative of economic diversification cannot be over-emphasised, especially with the slump of the crude oil price at less than $40 per barrel recorded in the past. Although the Oil price is picking up, the development has profound implications for the fiscal viability of government at all levels. We need to urgently improve the capacity of the Nigerian economy to develop the non-oil sector through the creation of an enabling environment for investors in those sectors.
The key thing is to improve the productivity and competitiveness of these sectors. We need to tackle issues of cost of doing business; better investment in infrastructure, funding issues, patronage of made-in-Nigeria products, policies that are investment friendly, strengthening of regulatory institutions, among others.
With many states unable to pay workers’ salaries and build infrastructure and roads, what investment areas should the government be looking at since the unitary system of government still puts so much power in the hands of the Federal Government?
There is the need to improve access of the smallholder farmers to market for agricultural sector productivity to improve. The government should put in place an effective and sustainable policy of guaranteed minimum price for agricultural products. We need to improve the linkage between the agricultural sector and the industrial sector. Storage capacity needs to improve to minimise post-harvest losses.
Tell us what the country should do to sustain the present economic recovery?
For Nigeria to sustain the present economic recovery and achieve the growth forecast, it must adhere to aggressive investment in infrastructure to boost productivity in the economy, such as reduction in multiplicity of exchange rates, alignment of procurement policies at all levels of government to support domestic investment; investment policy that would protect domestic investors, tax policy that is investment friendly, and interest rate policy that is also investment friendly.
The automotive policy should be urgently reviewed and reworked. In order to tackle the problem of hunger, the current commitment to agriculture should be sustained. But this should go beyond crop production. It should cover the entire value chain of production: storage, processing, transportation and marketing. Food processing firms should be given special incentives (tariffs and taxes) to reduce the price of staple foods such as bread and noodles.
How would you rate the foreign Exchange intervention by the Central Bank of Nigeria?
Of course, it has improved liquidity in the market. For instance, in 2016, many economists complained about lack of investors’ confidence in Nigeria’s economy. There was a sharp drop in investors’ confidence due to weak growth and the fact that the economy slipped into recession. Other factors that contributed to the weak investors’ confidence include currency depreciation of over 100 percent, liquidity problems in the foreign exchange market, which manifested in the acute scarcity of forex. But with the recent intervention on forex, manufacturers can now access foreign exchange for buying of raw materials, government revenue has improved drastically, states can now pay salaries and above all, investors’ confidence has also returned. Evidence of this is shown in the way the capital market is picking up.
