The Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA) has voiced serious concerns regarding economic imbalances in Nigeria, particularly highlighting the adverse effects of high inflation and borrowing costs on the private sector.
NACCIMA president, Dele Kelvin Oye, yesterday, emphasised that the current economic climate, characterised by hyperinflation and currency devaluation, is unsustainable and detrimental to business operations. He urged the government to implement urgent reforms aimed at stabilising the economy, reducing interest rates, and fostering a more conducive environment for private sector growth. Oye called for collaborative efforts between the government and private sector to address these pressing issues effectively.
(NACCIMA) has called for urgent economic reforms to address imbalances threatening the private sector in the country.
The Association said fresh key fiscal policies have become necessary following unsatisfactory economic performance of 2024 especially as it affects the private sector.
Oye, said all data, metrics and statistics have confirmed that the Nigerian private sector bore fully, the negative burdens of the nation’s current economic reforms, facing very harsh conditions including high inflation, increased borrowing costs, and currency devaluation.
Oye, who emphasised the urgent need for reforms to avert further economic strain on the private sector as the New Year begins, noted that Nigeria is a country with huge potential, innovative private sector minds, capital and opportunities, and deserves a listening economic team and team players who must recognise the private sector as stakeholders.
According to him, “We should agree that the 2024 economic performance was unsatisfactory for the private sector. All data, metrics and consequent statistics confirm that the Nigerian private sector has borne fully, the negative burdens of the current economic reforms.
“While in contrast, the Nigerian Public sector continues to thrive and expand. All economic benefits of the recent economic reforms have been translated to the public sector through high capital transfers and revenues. The private sector faced higher inflation, higher cost of borrowing/repayment for existing loans, the 2.4 billion USD CBN unpaid forwards, currency devaluation and higher costs in all sectors of the economy.
“This continued imbalance caused by increased public sector expenditure has destroyed value in the private sector due to excessive fiscal deficits which are financed through government borrowing at very high unsustainable interest rates. We are therefore making recommendations and suggestions that may be considered in the short to medium term.”
He went on to say: “Fiscal deficits arise when public sector expenditure exceeds public sector income. The funding of these fiscal deficits through borrowing results in high interest rates and high inflation.
“The solution to high interest rates and high inflation is for the public sector to spend less and to start becoming an efficient productive unit.
“We also need to debunk the myth of the government earning more revenue under the pretext of improved productivity. For the avoidance of doubt, payment of customs duties and taxation are not due to improved government productivity.
“These revenues are purely private sector revenues which constitute a transfer of wealth and capital from the productive private sector to an ever expanding unproductive public sector. The public sector does not own factories nor does it produce any goods and services sold to the customers. Rather it extracts value from the citizens through regulatory fiat. Awarding contracts is not the same as enhancing production.”
Oye added, “For 2025, the expenditure framework is skewed towards huge capital transfers to certain sectors which will not add value to the national wealth. The payment of high interest rates to local and overseas creditors regardless of asset class is close to financial “harakiri”. Financial assets (loans) should be created and counterbalanced by equivalent investment in productive assets which are expected to repay the loans.
“If these assets are offloaded to the capital markets, it will be possible to transfer many unproductive public sector loans off balance sheet thereby unburdening the government from excessive borrowing. Please note we do not advocate transferring public monopoly to private monopoly or creation of private uncompetitive markets.
“Government should learn from past experience and avoid engaging in new ventures that will create further bad loans. Liquidity, lower interest rates and regulation of public sector borrowing by the Central Bank.
“Aggressive repayment of domestic loans using the excess revenues will result in lower interest rate payments which will lead to more cash flow for FAAC and lower borrowing requirements. Early repayment or transfer of government loan assets will improve Liquidity and result in cheaper single digit loans to the Private Sector.
“Generally, Public sector loans must be secured with real assets or must be within the tenure of the government. Longer term loans must be investments in real assets and not on the government balance sheet.This shift would promote private sector growth and ensure that capital is allocated efficiently.
“The successful Eurobond offer was received with mixed feelings. We congratulate the Financial team on a successful outing. However, the nature of over subscription confirms the coupon offered was beyond market offers. Perhaps we need to consider a hybrid offer which allows a Dutch auction that mops up the best offers at each coupon level. The successful bidders made instant profits overnight on the offer.
“The government should be looking to reduce financing costs on an aggressive basis where possible. Because, while the improved liquidity gives the government access to international financial markets, they do not guarantee long-term economic stability. Relying heavily on foreign borrowing may expose the country to external shocks and currency fluctuations.”
On Foreign Reserves, Support for local industries and Private Sector, the Association advised “Introduction of public sector expenditure guidance at all government levels for purchase of locally produced goods and services will reduce pressure on foreign exchange demand by government agencies and their contractors.”
They stated, “Investment in public infrastructure should result in utilisation of more locally sourced inputs, higher investment on local infrastructure and improving local productive capacity. Areas like transportation, power, and technology—are key for both manufacturing and services.
“Nigeria needs a coordinated approach to delivering the latest technologies and digital infrastructure to facilitate delivery of social services, public health, educational and digital infrastructure. Government should introduce reforms and policies to facilitate, attract and retain private sector investment in digital education and modern skills acquisition, technical skills education for our teaming youth. Many employers are unable to find adequate skilled workers in many industries.
“The Industrial Park and Skills centre at the Abuja Free Trade Zone at Idu, FCT and many more around the country should be encouraged and supported by all tiers of government in Nigeria and the Organised Private Sector in Nigeria to produce a different positive outcome for Nigeria.
“By public sector philosophy, all government expenditure is necessary. The government should undertake a rigorous review of its current size and expenditure to identify and eliminate wasteful spending. Efficient allocation of existing resources can help reduce excessive borrowing .
“Other countries like Argentina have made political choices to eliminate recurrent budget deficits. The Nigerian budget for elected and unelected politicians can be adjusted. The size and number of government funded agencies can be reduced and taxes should be further reduced which will attract greater private sector investment.
“The government should create an environment where the private sector can take the lead in economic ventures. This includes deregulation in most areas, reducing bureaucratic red tape, and enhancing ease of doing business in Nigeria. (Regulatory Agencies like Standards Organisation, NAFDAC etc can be reformed to adopt internationally acceptable standards for Nigeria.)”
NACCIMA added, “Likewise Investment in infrastructure— A focus on investment instead of contract awards in areas like road infrastructure, industrial and residential estates, power infrastructure and other key infrastructure like airports and seaports are key for a sustainable economy. This approach will secure requisite private sector post construction management resources and working capital to operate and sustain the infrastructure, thereby ensuring an environment more conducive to business operations.”
On the 2024 Tax Bill, Oye said the “current media engagement between federal and state governments in newspaper and press releases only further confirms the disconnect described above. The beneficiary parties receiving taxpayer funds engage each other on how to secure a larger portion of taxpayer funds without consideration for the public or tax payer interest.
“We believe corporate taxes should be further reduced to 19 per cent and VAT pegged at 7.5 per cent. We believe this will grow the economy and result in higher tax revenues for the government. As a caveat to protect government revenues, each taxpayer must not pay less than the preceding tax year.”
According to him, “Significant tax payers like the telecommunications sector who require reforms; which will result in increased tax revenues should not be ignored. There must be real dialogue with genuine concessions to be made by all parties.
“The private sector (Aviation, Telecommunications, manufacturers, Free Trade Zones and other stakeholders must be engaged) in written communication. Committees that come to lecture taxpayers are not giving positive outcomes. For better coordination, the outcome of these engagements can be forwarded to the National Assembly through the office of the Attorney General as directed by Mr. President.”
The NACCIMA boss further advised, “Governments at all levels must understand their role as referees, intermediaries and facilitators. Governments are not industry players, owners of capital or benevolent entities. It is the right of taxpayers and citizens to demand basic facilities like security, utility infrastructure, social services, education and health.
“International statistics show a clear correlation between inflation and government deficits (Countries with reserve currencies like the United States are exceptions). For this reason, the size of the government must remain marginal.
