Kachukwu: Government should expect more investors to boycott Nigeria

Dr. Jon Tudy Kachukwu is a Council Member, Lagos Chamber of Commerce and Industry (LCCI), and past Chairman, LCCI Small and Medium scales Enterprise Group (SMEG). In this interview with TAIWO HASSAN, he bares his mind on the numerous challenges facing the Nigerian economy, especially the inflation rate, forex crisis, insecurity and AfCFTA, among others


What is your view on Nigeria’s foreign exchange management system?


I know that deliberate efforts of policymakers towards addressing the numerous structural bottlenecks stifling the ease of doing business is critical. Our foreign exchange management framework needs to be reviewed to expand the scope of market mechanism in the determination of the exchange rate. This is even more imperative in the process of attracting new investments and retaining existing ones.

Insecurity has become a critical problem in the country and government appears to be helpless in this regard. How is this impacting the productive sector of the economy?



Indeed, the security challenge going on presently in the country has underwhelmed sectoral performances of almost all the sectors in the economy. In fact, the manufacturing sector is among the sectors that are so hit despite being the key live wire of the economy.


So, the private sector group is very concerned about the impact of insecurity on the country’s economy.


Take for instance, agriculture, you will see many farmlands across the country (although more pronounced in the North and Middle Belt) have been destroyed in the process and this has continued to disrupt agricultural activities in these areas. These have severe implications for food production and distribution from farms to markets. Indeed, we need to recognise insecurity as a major driver of the persistent increase in food inflation in recent years.


The alarming state of insecurity in the country has hampered the movement of goods, services and persons across the country, with implications for agriculture, agro-allied services, trade and commerce, especially in affected areas. Transportation & logistics sector, hospitality and allied investments, education, construction and real estate have been severely impacted by the crisis.


Again, the worsening security crisis has cut off the operations of many SME businesses as they cannot go to the North West and North East regions.

What is the impact of the security crisis on government’s fiscal position?


The worsening security situation also impacts the fiscal position of government by making policymakers incur unplanned security-related expenditure at the detriment of infrastructural development. This could worsen 2021 actual fiscal deficit levels amid fragility in revenue growth from oil and nonoil sources.


What are the implications of the sustained inflation for the local manufacturing sector?


For me, what I will say is that this inflation rate will adversely affect the profitability of the manufacturing sector, especially MSMEs, because it is going to continue to take a toll on their bottom line operations.


In fact, the inflation rate is not good for a country like ours that is only recovering from recession. This makes it very worrisome in its entirety. It is even more pathetic for the manufacturing sector that has remained in recession, even after the technical exit of the country’s economy.


So, I can c a t e g o r i – cally say that the 18.17 per cent inflation rate is not healthy for the well-being of the people and the growth aspiration of the economy. It should, therefore, be properly managed before it spirals out of control. Clearl y ,


there is an urgent need for government to ensure price stability before the situation becomes deplorable. So, it is high time government pursued consumer price stabilisation measures that will stimulate growth in agricultural output and also deliberately support the manufacturing sector to guarantee improved output that can engender the reduced intensity of too much money chasing fewer goods.


Again, there is the need to further diversify the country’s revenue sources, including a Central Bank of Nigeria (CBN)’s sustainable plan to improve external reserves. But all these can be achieved by deliberately and sincerely partnering with the productive sector to grow non-oil export.


Also, I want to see the Federal Ministry of Finance (FMF) and CBN working more closely when designing policies that affect the real sector of the economy. This is to prevent a situation where policies are working at cross purposes.


Amid COVID-19 challenge, do you think government needs to prioritise allocation of forex to manufacturers for import?


Yes, government should give priority allocation of forex to manufacturers to import inputs that are not locally available and for which there are no immediate plan or resources to produce locally.


It is evident that there is a strong relationship between manufacturing sector growth and inflation rate, just like exchange and interest rates.


Therefore, in the immediate, government should assist manufacturing productivity with credit at competitive price.


This could be in the form of enhancing existing special credit windows or creating additional ones for this important sector of Nigerian economy.


There is the need to give effect to these measures immediately as the current security situation and the continued incidence of COVID-19 is negatively impacting businesses and lowering their resilience capacity. I know some policies are dynamics, they could change as soon as we develop local capacity.


Also, there are quite a number of moribund i n d u s – tries i n

the country. There should be an industrial clinic to engender their resuscitation in order to boost output and ultimately achieve price reduction.


With the commencement of AfCFTA, do you think Nigerian firms are ready to explore the opportunities?


The AfCFTA as an area, which we deserves close attention as the nation is looking at way to go as we articulate a foreign policy posture and thrust with due attention to the economy.


I am of the view that any foreign policy thrust should include a robust engagement that will promote the economy of the nation in which the private sector is expected to play a leading role. Besides, several Nigerian conglomerates have emerged as key players in some African countries and their products such as cement and other fast moving consumer goods dominate the market of those countries

Also, Nigerian banks and financial institution are already major players, especially in several African countries.

Again, I want to draw attention to the thriving Nigeria digital private sector as reflected in performance of several Nigerian fintech companies. All of these are indications of readiness of the Nigerian private sector to play key role in AfCFTA.


We know the country’s MSMEs sector plays a key role in the economy. But what is your view on the challenges facing MSMEs growth?


The MSME sector is the backbone of major development in economies and in Nigeria, we see that SMEs contribute 48 per cent of national gross domestic product. They account for 96 per cent of businesses and 84 per cent of employment.


According to the statistics from the National Bureau of Statistics, we see that they also account for 50 per cent of industrial jobs and 90 per cent of the manufacturing sector in terms of numbers of enterprises.


And from SMEDAN, in a national survey that was done in 2017, there are estimated 41.5 million MSMEs in Nigeria. Interestly, 10 per cent of these are in Lagos. However, the most critical infrastructures needed to drive economy is conspicuously absent. I can tell you that the business environment is characterised by uncertainties.


We know that some are obvious like the power supply is poor, roads are not very good, policies are sometimes unstable, and insecurity is unabated, especially in the North. We have seen how that has impacted food prices, because farmers cannot go to farms.


And that has, of course, also impacted inflation rate. Multiple taxation. Basically, these factors made the business environment unfriendly. However, to compound the SMEs problems, the advent of COVID-19 and other macro socio-economic challenges have been overwhelmingly.


What is your stance on mass rejection of MSMEs loan applications by commercial banks?


No doubt, there seems to be a general consensus that inadequate funding, which inhibits scale up, competitiveness and sustainability of businesses in Nigeria, especially MSMEs, has been further compounded by the economic and financial disruptions occasioned by COVID-19.


A 2018 study done by Enterprise Development Center of PAN Atlantic University for Development Bank of Nigeria Plc captioned accessing the financing gap for Nigeria’s MSMEs and emerging corporates reveals that in the last two years, the rejection rate of MSME loans applications by commercial banks was 50 per cent.


Many of the commercial banks are still sceptical to loan credit to SMEs sector for reason best known

to them and this is affecting SMEs growth. It is a matter CBN still needs to look into appropriately to save businesses from going under.



Again, what is your stance on the directive by the Central Bank of Nigeria to Nigerian banks to bring down the sector’s non-performing loans (NPLs) below five per cent?



To me, this is going to be a tall order target for the commercial banks to achieve this year, considering the prevailing economic challenges on businesses. You know many businesses, mostly micro, small and medium scale enterprises (MSMEs) are still facing straits, following the #ENDSARS protests, COVID-19 and its second wave, weak economic and business activities disruptions.


But I can say it was not a bad directive from the apex bank considering the increase in the amount of NPL and the need to bring prudence in accounting.


But the issues here are that of the present business climate won’t allow many MSMEs operators to redeem payments following adverse outcome of #ENDSARS protests, COVID-19, economic and business activities disruptions.


So if the pressure on NPL from CBN is too much, then we are going to see rise in business owners’ payment defaults.


For instance, MSMEs are out of capital struggling to access credit from the apex bank’s N50 billion credit facility slated for SMEs mostly affected by the economic disruptions amid numerous factors such as inability to meet working capital requirements.


What is your view on foreign investors jettisoning Nigeria for smaller countries?


On this matter, we have to put the  blame on the doorstep of the Federal Government over its inability to address the alarming bottlenecks facing Nigerian businesses all this while.

For instance, Twitter moved to Ghana to set up its African headquarters. The truth is private sector group has been complaining to government on cost of doing business in Nigeria, which is very high.


Others have to do with regulatory challenges among government’s MDAs, policy summersaults (fiscal and monetary policies), infrastructure deficit, exchange rate volatility, multiple taxation, harsh operating environment, low returns on investment, social amenities challenges and insecurity.


All these challenges have resulted to many companies leaving Nigeria for neighbouring countries. I want to tell you categorically that no investor will like to invest his hard earned money in an unconducive business environment like Nigeria, which is not stable both politically and economically.


Indeed, government should expect more foreign firms to boycott Nigeria until we are ready to address the obstacles hindering ease of doing business. Let me say it here that the bad state of Nigerian economy is allowing many established firms to leave the country for neighbouring countries.


For example, the way Ghanian Government is encouraging exporters, once you export and you bring in your shipping documents, the Ghanian government will refund you the total money of the invoice value for your goods.


At times, when it comes to dollar repatriation, Ghanian Government would repatriate your money as and when due. If it is going to take three or six months, they will tell you and you get it as and when due. What about the instability in policy, insecurity, infrastructure decays, multiple taxation.




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