FG must save Nigeria’s real sector from total collapse-Oyerinde

Mr. Adewale Oyerinde, a seasoned economist, the Director-General of Nigeria Employers Consultative Association, NECA. In this chat with LABOUR EDITOR, Ufomba Uzuegbu, he calls on government to unleash a concert of measures to save the nation’ real sector from total collapse. Excerpts:

What are the challenges of the nation’s real sector ?

It is no gainsaying that organized businesses have witnessed varied challenges in recent months. From shortage of FOREX, stringent regulatory environment to non-alignment of fiscal and monetary policies, which when combined makes doing business difficult.

It is obvious to all discerning Stakeholders that the Nation is faced with acute and self-inflicted revenue challenges and a rising debt profile, among many others. Even with the nation’s current level of indebtedness, the Government is still poised to borrow over N11 trillion to finance the 2023 national budget. Currently, the Government had made a cumulative expenditure proposal of over N19 trillion in the 2023 national budget, a 15.4% increase over the 2022 estimate. While it is necessary and critical to generate revenue to fund not only the 2023 national budget but also to liquidate the interests accruing on the debts, Government will do well not to further burden the Real sector with additional taxes and stringent regulatory environment.

While debt and paucity of revenue are challenges that are acknowledged, organized businesses should not be made to suffer the lack of proper economic planning and political will that have pervaded successive Administrations. At the last count, organized businesses are presently faced with over fifty different taxes, levies and fees at all tiers of Government, some of which are duplicated. Currently, at the National Assembly, there are over five different Bills, which seek to impose various taxes and levies on Organized businesses in addition to the notable taxes and levies which are of general application, such as The National Information Technology Development Levy (NITDA Levy), Education Tax (or Tertiary Education Tax), National Social Insurance Trust Fund (NSITF), Company Income Tax (“CIT”), Television and Radio License Fee, Local Content Levy, Stamp duty, among others.

While taxes are global phenomenon, Governments all over the world seek to protect their most productive sectors rather than tax them out of existence.

It is strange that at a time when Government should do all that is necessary to protect businesses from total collapse and reduce the increasing unemployment rate, there are proposals to further increase Excise tax on select products, including the Spirits, Alcoholic and non-alcoholic products.

What is your take on government’s suspension of Telecom tax and the planned increase of Excise on spirits, alcoholic and non alcoholic beverages ?

We commend the Federal Government for heeding the call to suspend the proposed telecoms tax in view of the many economic challenges faced by operators and Nigerians in general.

We commend the Federal Government also for suspending the Telecoms tax as it has the potential to compound the challenges of the sector and further burden Nigerians. At a time when the purchasing power of the citizens is being eroded by inflation and other negative economic indices and the Telecoms industry is critically challenged, the best that Government can do is to provide relief for the citizens and business owners, notwithstanding its dwindling revenue.

While the nation grapples with revenue challenges, we urge Government to equally drop the idea of increasing excise on spirits, alcoholic and non-alcoholic beverages as being proposed. The increases, if implemented, will not only worsen the already bad situation of the industry but will also create a major shock in the industry, leading to job losses. Rather than overburden businesses that are already struggling, Government should explore other options for increasing revenue through widening the tax net, reducing governance costs, addressing the massive oil theft, and dealing with the unsustainable subsidy regime.”

Organized businesses currently face major operational and sustainability challenges and Government should not contribute to the demise of more businesses. He expressed that businesses are not striving to be competitive again but are now more concerned with sustainability. The trend of multiplicity of taxes and other unfavorable economic factors have led to the shut down of many businesses while some others relocated to neighboring countries.

This action will not only reduce the competitiveness of the industries but will also increase the cost of doing businesses and further reduce the potential sustainability.

It is in the best interest of Government to protect the Real sector rather than tax it out of existence. As the AfCFTA comes into full swing, Nigeria cannot afford to become a dumping ground for cheap imported products because we have refused to protect local businesses.

Over the years, we have urged Government to expand the tax net, take a bold step towards stopping the oil-theft industry, take more than a cursory look at national assets that are laying waste and address the national embarrassment called the petrol subsidy regime. There is no justification why the Nation’s four refineries are still moribund after many Turn-Around-Maintenances.

It will be counter-productive for Government to continue tightening the noose on legitimate businesses that are contributing to national growth while there exist obvious wastages and inefficiency in Government yet unattended to. As a panacea to the ever reducing Direct Foreign Investment, rising unemployment and multi-faceted revenue challenges, Government and its Agencies must protect local businesses and make the operating environment more hospitable.

The Federal Government dropped the hint on Monday, of a possible rise in the pay of workers in public service. It was silent on the workers in the private sector. What is your take on this, Sir?

Certainly, in many parts of the world, wage adjustment to cushion the ravaging global economic crisis has been receiving a positive nod. It is without a doubt that the current N30,000 minimum wage when gauged against the country’s inflationary pressures, is unrealistic, to say the least. We are aware that some States have not yet implemented the current minimum wage attributing the reason to financial constraints. We have always shared the view that there should be a paradigm shift from minimum wage to living wage. While the former continues to remain insufficient due to the constant change in the economic climate the latter considers current realities as prerequisites to meeting basic living standards. Even if the minimum wage is increased from the current amount to slightly higher, if inflationary trend and other factors are not considered, it would still be insufficient to meet the monthly increasing living needs of the least paid Nigerian worker.

While wage adjustment may seem appropriate at the moment, the timing prospects a cause for concern. Nigeria is currently faced with so many economic challenges, which could affect the sustainability of any form of wage adjustment. A huge chunk of the country’s recurrent expenditure is funded with loans with a consequential effect on its rising debt profile. Therefore, the Federal Government has to give primary attention to fixing the economy first. For the country to enjoy any real growth in the short and medium term, Nigerians may have to tighten their belt for sometime. This is a sacrifice that must be made.

As for the Private Sector, wage adjustment in a Non-Unionized environment is subject to some factors such as, income flows, profit margins, work performance, productivity, etc. While in unionized workplaces, wage adjustment is a product of negotiation between employers and workers subject to the affordability of the paying party and other practical factors. And it is worthy of note that many Private Sector employers were already paying above the current minimum wage even before it became statutory. So to a large extent, the private sector employers are doing better in the context of salary payment than the Public Sector.

N30,000 minimum wage has remained a thorny issue with most state governors declaring that they are unable to pay because of lack of funds. Your reaction, Sir.

Yes, the revenues of State Governments vary from State to State. Apparently, we understand that some States are currently struggling with revenue generation. Others have resorted to borrowing. However, when you consider the cost of governance and other non essential spendings in these States, especially during the just concluded election primaries, we actually wonder whether the outcries are genuine. In addition, Nigeria has been blessed with an abundance of fertile lands, minerals and human resources. We believe each State has the capacity to be creative and seek ways to improve their revenue base. As such, we believe each state has the potential to pay the N30,000 minimum wage. With a proper re-evaluation of their priorities, the States should be able to pay.

As The nation gears up for general elections in 2023, what in your view, should the in-coming  government do, to make sure that the nation regains its greatness in the comity of nations ?*

Elections provide the opportunity for electorates to decide who they want to govern them for a period of time. In recent times, businesses have witnessed significant decline in profitability and competitiveness. These issues are no longer news. The evidence is obvious. While we remain apolitical in view of our clear mandate, we will continue to sound our agitations to both the current and incoming administrations so as to position the country as a global leader in terms of industrialization and economic transformation. We had, on many occasions and at different forums, made concise recommendations aimed at positioning the Private Sector as the engine of growth and national development. For example, we have continued to advise the government to partner with the private sector to fix critical infrastructure necessary for business expansion, job creation and economic growth. We cannot over-emphasize the poor mismatch of government’s fiscal with monetary polices, unending tax burden on businesses, skyrocketing inflation, poor foreign exchange regime – that have contributed to an inhospitable business environment. In addition, we hope other strangulating issues, such as the country’s debt profile, continued budget deficits, insecurity, under-diversification of the economy, incomplete deregulation of the oil and gas downstream sector and the notorious subsidy scandal should be given high priority.

Are you convinced that the organized Labour is doing enough, in terms of interrogating the political actors in the 2023 elections?

To a large extent, Organized Labour has been championing the cause of improved working conditions and living standards. Labour leaders understand that these are key ingredients for job satisfaction and poverty reduction. We hope that Organized Labour in its many forums and engagement sessions will continue to question the competence, integrity and capacity of these political actors with the aim of promoting and protecting the interests of their constituents and the Citizenry at large. Organized Labour must request for a call to service, good governance, poverty eradication, structural changes and quality leadership. While they have done quite well, Labour can do better as critical Stakeholder in the Nigeria Project.