Director General of the Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf in this interview with correspondent, he speaks on the needs for Government to put in place a good investment enabling environment that would encourage local production. Excerpts:
Some Chambers of Commerce and Industry are complaining bitterly of how hard doing business in Nigeria has become since CBN imposed certain policies, especially, with sourcing of foreign exchange. What, in your opinion are their fears for the economy?
What the CBN needs to do is to put up a system that identifies genuine needs for foreign currencies. If items identified by the chambers of commerce, especially the Lagos Chamber of Commerce and Industry (LCCI), are input to production, they should be allowed to access forex. When an item is an input to production and is being imported, it is definitely going to affect domestic production. The LCCI has met with the CBN to relay their fears and also identify productions that are being dumped into the economy. They want the bank to ban them.
Actually, it is not the job of the CBN to restrict imports. That is a fiscal policy function. CBN is meant to regulate monetary policies. Restriction of importation is the job of government, which is part of fiscal policy; it is not the CBN’s function. For now we don’t have a functional ministry of finance or of trade and investment or of agriculture; they are the people to do these things. They might work out a ban, a tariff or a quota system, which are not monetary policy tools. But the CBN is using monetary policy to do all that, which is by saying that importers can’t access forex instead of banning imports.
This policy is also supposed to encourage local production. When the cost of importation is high, if one wants to make profit, it would not be posible.
The truth is that the environment does not encourage local production; do we have good roads, good tax system, or good governance in place? Government also needs to put in place a good investment environment that would encourage local production. Manufacturers need an enabling environment to thrive.
As an industrialist, what are those policies you need to heave a sigh of relief?
We have always talked about poor operating environment. In the areas of infrastructure, a lot need to be done. The power sector is not yet at the level where it should be, it can be better. Our roads need to be rehabilitated. The railways should be upgraded. Take for instance, the Peugeot Automobile of Nigeria (PAN), in Kaduna used to have railroad from Lagos to their factory. That made it easier for them to evacuate their raw materials from the ports to Kaduna, the same way they shipped the finished products down south. Now that rail line is not functioning, government should rehabilitate the rail lines.
Multiple taxations is a disincentive to investment in this country, both for local and foreign investors. Lack of funds at an appropriate interest rate is a major challenge. From time to time, CBN comes up with intervention fund that is not the solution.
There should be a policy by CBN to make it possible for the commercial banks to give out loans and facilities to manufacturers at a relatively low rate, as it is obtainable in other parts of the world. There is no place in this world where manufacturers source loan at 28 per cent. There is no way you can borrow money at 23 percent and expect to make enough profit to pay the interest on that loan and keep some for yourself and shareholders.
So there is need to strengthen Bank of Industry (BOI), empower them financially to be able to cater for the financial needs of the manufacturing sector. BOI should also be made to lower their interest rates. Towards the end of the last administration, they launched the Nigeria Development Bank; we are urging the present government to implement it as soon as possible. We need that development bank to be able to give out loans at 10 percent interest rate; because that is the only way we can get both local and foreign investors into the country.
The Nigerian economy appears to be stagnant, how can it move forward?
I wouldn’t say the economy is stagnant, because a lot of things are going on. Manufacturers are still in business, though, they may not be doing so at full capacity. There are a number of challenges and we don’t expect all of them to be addressed in one day. Government hasn’t come out with a policy, because the ministers are not on ground yet. I don’t know how we can react about the economy, when there is no policy thrust. I’m hopeful that by the end of this month or next month, there should well known policy thrust of the government, after which we can then react. I think the economy is moving on, though sluggishly.
In what ways have the policies affected the credibility and confidence of Nigeria’s trading partners?
With the current official exchange rate, it is impossible for all demands for forex to be met, even for those that are eligible by the CBN criteria. Many investors had suffered serious embarrassment and credibility crises as a result of their failure to meet their financial obligations to their overseas suppliers. This is an experience that cuts across all sectors of the economy.
Transactions under Bills for Collection were among those most affected. Bills for collection are credit facility arrangement between the Nigerian importers and their foreign suppliers. Because some of them could not remit funds to meet these obligations, these facilities have been terminated. Major problem of credibility has been created for these firms.
Even more disturbing is the fact that some of these transactions were ongoing before the introduction of these policies. Some importers had even taken possession of their consignments. Remitting funds have now become a problem. The situation is so bad that some of the foreign suppliers had to fly into the country to validate importers’ claim that they had an issue with access to foreign exchange. It is disturbing that there was no sufficient provision even for transactions that were ongoing before the policy.
The truth is that, these developments have significantly dented the image of the country in the international trade arena and international financial markets. This, I believe is not good for the image of the country as the largest economy in the African continent.
The international media have argued that, in reference to the few decisions taken so far, government seems to focus more on ‘protecting the common man’ as against opening up the business space for investment; should this not be a cause for concern?
I believe that these policies are not protecting citizens; rather, they are hurting the people. The policies are misguided. Civil servants and some businessmen, for their own selfish interests, convince government that these things protect the citizens, but, in reality, it doesn’t protect anyone. If small and medium scale manufacturers are dying, because they can’t get Dollars, how can that protect citizens? Are workers, who lose their jobs, protected? The small airline businesses that employ people are going to suffer when we create a state airline. That airline would be inefficient, would charge high fares and one won’t have a choice, because they would say it would be the only one that can go on international routes or can stay in a certain airport terminal.
LCCI and other chambers of commerce complain of shortage of funds to do business and stifling operating environment; what does this portend for the economy?
The government came in ignoring the economy. I think there is a posture almost as if the economy is not important and that corruption is the only problem in Nigeria. It believes that if it fixes corruption everything would be fine. It seems to me like ancient economics, a pre-modern approach to managing the economy.
Yes, we can deal with corruption, but we must also consider state, industrial and economic policies.