How to make NEEDS work, by industrialists, others
Babatola Adeyemi
UNLESS the Federal Government re-orders its priorities, its economics revival package encapsulated in the National Economic Empowerment and Development Strategy (NEEDS) may end up as a mere statement of good intention.
This warning came yesterday in Lagos from sector operators under the aegis of the Lagos Chamber of Commerce and Industry (LCCI) in its second quarter review of the economy held at its Commerce House in Lagos.
Speaking through their president, Chief Olusola Faleye, the industry chiefs, said poor infrastructure had remained a major constraint to industrial growth, adding that some measures introduced by the government were questionable while the feasible ones were being poorly implemented.
Faleye maintained that the operating environment had remained disenabling and the private sector on which NEEDS success anchored on was barely managing to survive.
He said: "We believe that an economy and a people can only be as healthy as its private sector, since it is the private sector that produces wealth, creates jobs and generates income for government and the citizens." NEEDS is the fulcrum of government's economic revival agenda, with emphasis on an empowered private sector to drive its implementation, in further demonstration of government's restated commitment to a private sector-led-economy.
Faleye stressed that without a significant improvement of infrastructure, government won't meet the targets set in the NEEDS' document.
Citing fluctuating power supply as an example, even as he canvassed that the revenue windfall from crude oil should be utilised for infrastructural development, the industrialist stated that: "stable electricity supply is so critical to private sector performance that something urgent really needs to be done to improve the current power supply situation.. The improvement in the power supply situation would significantly reduce the huge burden of energy cost of all categories of business enterprises in the country."
The LCCI boss described the import prohibition policy as defective. According to him, some vital imports and raw materials of some manufacturing companies were on the prohibition list with thousands of jobs lost in the distributive trade sector, especially in areas where there were low or total absence of local capacity to meet domestic demand.
He added: "The inevitable consequence of such defective policy is the creation of a large and vibrant underground economy where transactions take place illegally. It has exacerbated the problem of smuggling and heightens the temptation for corruption within the Nigeria Customs Service, especially those at the borders and the ports.
Faleye also decried the interest rate policy, which he said had been rather inconsistent with government objectives.
He faulted the Central Bank of Nigeria's (CBN) right to indirectly influence interest rates, as stated in the 2004/2005 monetary policy circular 37.
To him, the government is operating a regime of interest rate fixing.
Noting that interest rate had been fixed at four percent points above the Minimum Rediscount Rate (MRR) which is 15 per cent, Faleye said the CBN's alleged attempt at ensuring banks' compliance to an interest rate cap of 19 per cent would fail because banks would not succumb to "the current regimentation and administrative control."
He asserted that the 19 per cent interest rate cap was at best theoretical, as borrowers now have to contend with numerous bank charges, which put interest rates at between 35 to 45 per cent.
Faleye stated further that the deregulation of the downstream sector of the oil industry lacked a clear and rational basis for the pricing of petroleum products, and repeated an earlier advice against the withdrawal of public sector funds from the banks, to avoid instability in the financial system as well as aggravate the problem of high interest rate.
The LCCI chief also faulted the present sharing formula of the Valued Added Tax (VAT), regime which he described as unfair.
He suggested that 50 per cent of VAT proceeds should go to states from which the bulk of the revenue was generated. "If the Lagos State government earns enough from VAT, the sales tax controversy would have been avoided.
On a positive note, Falaye however lauded the stability in the exchange rate, with N135.5 to the dollar at the beginning of the quarter and N132.8 at the end, which also translated to an appreciation of two per cent for the naira.
He also noted that even in the parallel market, there was just a marginal depreciation of 1.8 per cent, with the rate at N139 to the dollar at the beginning of the quarter and N141.05 at the end.
Notwithstanding earlier identified lapses, he said that the stability witnessed in the exchange rate was a tribute to the astute management of government monetary and fiscal policies, which had moderated monetary growth.
The industrialist also commended the local content policy, which he said would boost job and wealth creation, urging that both the human and material components of government projects should have local contents clauses.
To tackle some of the other lapses he identified, Faleye called for a more realistic and sustainable approach to the interest rate management.
The reduction of inflation rate, increased supply of loanable funds by non-withdrawal of public sector funds from banks, reduction of current liquidity ratio and banks' reduction of their overheads in order to reduce ultimate cost of funds, he asserted would buoy the economy.
