Tinubu Strikes a Chord with Manufacturers, OPS

In his May 29 presidential inaugural address, President Bola Ahmed Tinubu announced policy measures that resonated with the desires and aspirations of the Nigerian manufacturing sector, writes Dike Onwuamaeze

It seemed that President Bola Ahmed Tinubu, Nigeria’s newly elected president, struck the right chord with Nigerian manufacturers and the organised private sector of the Nigerian economy with his presidential inaugural address on May 29.

In the inaugural address, Tinubu outlined his plan for the Nigerian economy. He said: “On the economy, we target a higher GDP growth and to significantly reduce unemployment. We intend to accomplish this by taking the following steps: First, budgetary reform stimulating the economy without engendering inflation will be instituted.

“Second, industrial policy will utilise the full range of fiscal measures to promote domestic manufacturing and lessen import dependency.

“Third, electricity will become more accessible and affordable to businesses and homes alike. Power generation should nearly double and transmission and distribution networks improved. We will encourage states to develop local sources as well.”

He then wooed prospective investors in the Nigerian economy. “I have a message for our investors, local and foreign: our government shall review all their complaints about multiple taxation and various anti-investment inhibitions.

We shall ensure that investors and foreign businesses repatriate their hard earned dividends and profits home.”

 He added that security shall be the top priority of our administration because neither prosperity nor justice can prevail amidst insecurity and violence.   

Tinubu also promised that his administration “shall continue the efforts of the Buhari’s administration on infrastructure,” and added the clincher by stating that the country’s monetary policy needs thorough housecleaning, directing that the Central Bank of Nigeria “must work towards a unified exchange rate. This will direct funds away from arbitrage into meaningful investment in the plant, equipment and jobs that power the real economy.

“Interest rates need to be reduced to increase investment and consumer purchasing in ways that sustain the economy at a higher level of prosperity.”

MAN’S PTIMISM

Reacting to Tinubu’s inaugural address, the Director General of Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, said that the president’s resonated with manufacturers in particular and the business community in general.  

Ajayi-Kadir said, “Even though we have to critically consider the inaugural speech of Mr. President, I would like to make the following comments as our immediate reaction.   

 “It is, therefore, highly commendable and an assurance of better days ahead to hear the president saying that his industrial policy will utilise the full range of fiscal measures to promote domestic manufacturing and lessen import dependency. For me, this is a positive development. It is an unmistakable indication of a far-sighted strategic choice.

“What is most gratifying is that it came from Mr. President from day one. The issues of multiple and often times punitive taxation; conflicting and contradictory fiscal and monetary policy measures; skewed and poor management of the foreign exchange regime and the long overdue stoppage of the fuel subsidy were addressed in the president’s speech and I believe they resonate with manufacturers in particular and the business community in general.”

He, therefore, prayed that a marching order, so to say, is needed to move the central bank towards a unified exchange rate. “I am glad that Mr. President was very clear on this. We also expect that, in line with his promise to enable a supportive fiscal policy regime, Mr. President will order a reversal of the unwarranted violation of the government’s three-year excise escalation roadmap on alcoholic beverages and tobacco.

“As we have shown, the latest hike as contained in the 2023 Fiscal Policy Measures is not only going to ruin the affected sectors, it will be counterproductive for government revenue in the near future.

“Our infrastructure has remained inadequate and so the ongoing efforts of the government have to be intensified and this again was mentioned by the newly inaugurated President,” Ajayi-Kadir said.

ADDITIONAL REQUESTS

Embolden by Tinubu’s gesture to befriend the manufacturing sector, the MAN also made additional requests to spot other low hanging ripened fruits for Mr. President.

It said: “In addition to pursuing the unification of the exchange rate, the CBN should be prevailed upon to take effective action to give priority to the allocations of foreign exchange to the productive sector, particularly to manufacturers to import raw materials, spares, and machinery that are not locally available.

“Direct the NERC to admit all qualified applicant companies into the Eligible Customer Scheme in order to allow them access to power as stipulated in the Electric Power Sector Reform Act 2005.

“Direct all relevant agencies of government to ensure that the electronic call-up system at ports aimed at redressing the congestion works without fail.

“Revisit the Finance Bill 2022 to ensure it includes the critical inputs of the organized private sector. In particular, the jettisoning of the highly objectionable removal of the 10 per cent investment allowance on the acquisition of plants and machinery (in the Company Income Tax Act, Section 32).

“Additionally, to ensure that the imposition of the 0.5 per cent levy on eligible imports from third countries is limited to goods that we have the capacity to produce locally and quite importantly, exclude raw materials that are not locally available.

‘The input of the Organised Private Sector on the CEMA bill should also be taken on board before the amendment bill is signed into law.”

MAN also asked the president to announce a special policy initiative to address the revival of closed and distressed industries, particularly in the northeast where 60 per cent of our member companies have closed.

“Craft and announce a special policy initiative to leverage diaspora expertise and investment to address evident gaps and help to boost the performance of the economy.

“Direct all ministries, departments, and agencies of government to unfailingly comply with Executive Order 003 on the patronage of made-in-Nigeria products. In this regard, there should be strict application of the margin of preference, effective monitoring and periodic evaluation of compliance, and appropriate sanctions meted out to MDAs acting in breach of the executive order. 

“Announce a special policy initiative to derisk manufacturing and release adequate funding for the sector through effective funding of special lending windows,” MAN requested.

KPMG APPLAUDS PRESIDENT

Another player in the organised private sector that was enthralled by Tinubu’s gestures to address perennial challenges hobbling the development of the Nigerian economy is a Partner and Chief Economist of KPMG, Dr. Yemi Kale.

“I think he (Tinubu) got it right in terms of things that are most urgent, especially things that can be completed in the first four years. To me, I am more excited about public sector reform and public finances,” Kale said.

But he believed that the public sector reforms would be deep and go beyond rationalisation of public sector as contained in the Orasanya Report. According to him, the reform must touch the capacity of the public servants themselves.

Because “no matter how good his ideas and no matter what he intends to implement it is going to be implemented by the public service. And if the public service does not have the capacity to do it, or the interest in doing it, that is why very little is done in many ministries and agencies because either the capacity is not there or the interest to change things just does not exist.”

Kale was also captivated by the desire of the president to address the challenges of multiple taxation on the manufacturing and productive sectors of the economy.

He said: “I am one of the few people that does not believe in increasing taxes. I am not one of those who are fans of pushing up taxes particularly in a recession or when the economy is actually struggling with fragile growth, particularly in Nigeria’s economic model where household expenditure and private investment are two largest contributor to our GDP.

“When you increase taxes you are squeezing household consumption expenditure and you are also squeezing the earnings of businesses thereby squeezing business expansion and so on.”

He explained that what happened during the ex-President Muhammadu Buhari’s administration in the past eight years when the government’s model was public sector driven.

Buhari’s administration, according to him, expanded government expenditure, it expanded government investment that is why we had infrastructure development. But it did not expand government investment and consumption because the economy was expanding and they were getting more revenue.

It did that in two ways. One was to tax consumers and businesses and squeezed the household consumption expenditure and ability of businesses to make investment and growth and at the same time they expanded the economy by debt and then to repay the debt again you go and squeeze the households and businesses again. So you increase public expenditure by 30 per cent, increase public investment by 30 per cent but in the process you squeeze household consumption, which contracted by about three per cent and you squeeze private investment which was more or less flat, by doing that your growth was just fragile and small.

“So I am not a fan of increasing taxes. I prefer harmonizing the multiple taxes that is out there. I am a bigger fan of more efficient public sector expenditure that get rid of wasteful expenditure like the fuel subsidies.

“When you look at revenue generating agencies you will find that as their revenue grow they will just find new things to spend money on. They will just increase their expenditure. I remember one when I was still in government that one of the revenue agencies even though they have 800 staffs to my 6,000 staff their office supply was higher than my entire budget,” said Kale, who was the statistician general of National Bureau of Statistic.

He advised that the target of Tinubu’s administration would be “at harmonising the taxes, expand the tax net using technology and then more efficient expenditure structure. I think the President got it right.”

CPPE DECRY INSECURITY

Similarly, the Founder and CEO of the Centre for the Protection of Private Enterprise (CPPE), Dr. Muda Yusuf, also gave the thumbs up for Tinubu’s declaration that he is going to address the impracticable security challenges militating against the development of Nigeria’s economy.

According to Yusuf, fighting insecurity would impact definitely on economic growth because the risk of investment is correlated to the risk that you have in the environment. Insecurity has affected some major segments of the economy, including agriculture that accounted for 23 per cent of our GDP.

“We know the impact of insecurity on the agricultural sector that virtually crippled it. We know the implication for that on food inflation and implications of inflation on poverty.

“Again, on the perception of the country as an investment destination, perception matters a great deal though it is not all the time that it reflects reality. But anybody watching Nigeria from afar with all the stories that hit the headline about number of people killed by bandits and insurgents will be scared away.  

“We have investors that have extremely high risk evasion appetite and those with average risk appetite that will just run away. That is why we mostly have Asians investors whose risk appetite is extremely very high. If we have much better environment as far as security is concerned, we will be able to attract more investment from the West. It is good to have a very good defence budget but again we have deprived a number of sectors of very valuable resources,” Yusuf said.