The Lagos Chamber of Commerce and Industry (LCCI) has identified three critical factors which it said are crucial to drive economic diversification in the Nigerian economy.
These factors are the quality of infrastructure, the quality of policies and the quality of institutions.
The chamber said if they are put right in order, the objectives of the ongoing economic diversification can be achieved.
The LCCI’s view which is contained in a statement titled: “Agenda for Economic Diversification”, which was signed by its Director General, Muda Yusuf, said it was crucial to get these key parameters right, noting that it was also equally critical to ensure proper alignment among these key variables to ensure sustainable economic diversification.
“The policy factor has many dimensions: monetary policy, forex policy, interest rate policy, tax policy, trade policy, procurement policy and investment policy. Each of these policies has a major role to play in the economic diversification process,” said the chamber, adding that “the policy mix must be right for the desired outcomes to be achieved.”
It said the monetary policy should be designed to drive domestic investment through a moderation of the monetary tightening stance of the Central Bank of Nigeria (CBN).
This, it said, was needed to moderate interest rate in the economy.
“It is difficult to drive domestic investment at current levels of interest rate which is well over 25 per cent, for most economic players. The economy needs investment, especially domestic direct investment to drive diversification,” added.
The LCCI also noted that the foreign exchange policy is another very important policy component which impacts on economic diversification, saying that a forex regime that perpetuates a rent economy would not serve the cause of diversification.
LCCI criticised the renewed aggressive tax drive in the country, saying that it focused more on investors than consumers.
“The burden of taxation is more on the investors in the economy than the consumers. The Federal Inland Revenue Service (FIRS) has scant regard for due process in its drive for revenue. It is therefore inherently a disincentive to investment and economic diversification,” the chamber added.
The chamber also chastised the three tiers of government for targeting investors more than consumers, saying that this is not in consonance with best practice principles in taxation.
According to the chamber, “in an economy which is almost 50 per cent informal, this structure of taxation is not investment friendly. The formal sector of the economy bears the largest burden of the tax system. The tax policy needs to be better attuned to economic diversification through a reversal of the tax burden from investors to consumers. The use of banks as collection agents for the FIRS (in its current form) is very disruptive, distracting, arbitrary, oppressive and unfair to investors.
It is a serious disincentive to investment and the promotion of financial inclusion. This approach should be discontinued. Taxation should not be seen only as an instrument of revenue generation, it is also a potent instrument for stimulation of investment.”
Also, as part of the effort to achieve the objective of economic diversification, the LCCI urged government regulatory agencies to adopt friendly approach in the implementation of policies.