Political Considerations, Labour Unions May Impede FG’s Reforms, Rewane Warns

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Obinna Chima

A member of President Muhammadu Buhari’s Economic Advisory Council, Mr. Bismarck Rewane, says some of the economic reforms outlined by the federal government in 2022 may be hampered by political considerations and labour union activities. Rewane, who is Managing Director, Financial Derivatives Company Limited, said this recently at a forum on the 2022 Nigerian Economic Outlook organised by First Bank.

The federal government, through the Finance Act, recently introduced some reforms in the 2022 budget. However, the elephant in the room remains the planned removal of fuel subsidy, which has been described as a major drag on the economy. While the government has disclosed plans to end the payment of subsidy by the second half of this year, there are concerns about likely showdown from labour unions.
Rewane noted that 2022 would be a year of two halves.

He stated in his outlook for this year, “If you go into reform, it could be one half. But reform could be impeded by political considerations and labour union activities. Insecurity could prove tricky to contain and will become a political campaign tool for the opposition.”

In addition, Rewane anticipated that the Central Bank of Nigeria (CBN) would increase forex supply to manufacturers and ease currency pressures. He added that pre-election spending would be positive on the economy because aggregate demand would boost corporate performance.

“Declining inflation will be positive for consumer purchasing power and monetary tightening in advanced economies could trigger capital outflows,” he stated.

In his 2022 economic outlook, the FDC also estimated that crude oil prices would remain relatively stable and the country’s real Gross Domestic Product (GDP) growth would be sublime.
It stated, “Competition between traditional banks and fin-techs will intensify, forcing banks to reduce or eliminate transaction costs. Banks with constant innovation and regional diversification to remain resilient.

“The manufacturing sector is likely to grow by 4.7 per cent in 2022. Improved forex liquidity and increased product innovation will boost sector growth and players would benefit from volume and value growth.”
According to him, top players, such as Nestle Nigeria and Unilever, would report profit growth of up to 20 per cent in 2022. He added that the agriculture sector was likely to grow by 1.6 per cent in 2022.

He noted that an efficient rail system would ease logistics constraints and boost productivity.
Rewane also stated that the financial services industry was likely to grow by 8.32 per cent in 2022, anticipating rationalisation and drift within the industry.

He projected that in 2022 there would be increased partnership and collaborations with fintechs in promoting financial inclusion, especially with aggressive digital innovation and lending solutions.

Rewane stated, “There will be possible mergers and acquisitions within and across tiers to boost banks’ capital structure. Tier I banks will leverage on robust customer base and balance sheet size; deepen penetration to the unbanked and under banked; increased African footprints and improved corporate governance within the banking space.”

As part of its reforms, the federal government recently announced that that henceforth it would charge offshore companies providing digital services to local customers in Nigeria a six per cent tax on turnover as provided in the 2021 Finance Act. The new policy is contained in Section 30 of the Finance Act, which amended the provisions of Section 10, 31 and 14 on VAT obligations for non-resident digital companies. The federal government also introduced an excise duty of N10 per litre on all non-alcoholic, carbonated and sweetened beverages in the country, which has been widely criticised.