Stakeholders of the Nigerian manufacturing sector request fiscal and monetary reforms for improvement of the country’s business environment and enablement of products competitiveness in domestic and international markets. They expect that the reforms would replace expenditures like fuel subsidy, directing them to productive ends to finance development of infrastructure. They added that monetary policy reforms, through management of the foreign exchange market of the country, could block financial leakages that would generate N4 trillion for the government in 2023 to finance significant infrastructures.
Operators further project that the reforms should break the monopoly of the Nigerian National Petroleum Company (NNPC) Limited as major importer of refined petroleum products and approve the request of the Manufacturers Association of Nigeria (MAN) to be given licenses to import refined petroleum products from the Republic of Niger. The Director of the Centre for the Promotion of Private Enterprises (CPPE), Dr. Muda Yusuf, in his paper titled “Unlocking Revenues From Subsidy Regimes,” argued that the Nigerian economy is weighed down by the fuel subsidy regime and the foreign exchange subsidy regime.
Proposal for review of the exchange rate assumption in budget.
The foreign exchange policy regime is regarded as the second major subsidy regime which could generate massive revenues but has led to loss of trillions of Naira in the federation account. In 2021, there was a sale of an estimated $18 billion US dollars as interventions in the foreign exchange market at a subsidized average rate of N400 per dollar by the Central Bank of Nigeria (CBN). During this period, effective exchange rate in the economy was N560/per dollar. Resultantly, there was an estimated revenue loss of almost N3 trillion.
Yusuf stated that revenue losses caused by the foreign exchange policy regime damages the economy as much as the fuel subsidy does. However, the National Assembly and the CBN had greatly underestimated the exchange rate standard in the appropriation bills of the past few years. Therefore there is a suggestion for review of the exchange rate assumption in the budget to aid a reflection of the exchange rate realities and increase revenue to the federation account. This review is proposed to be done within the framework of the Finance Act which is in the process of being reviewed.
Nigeria has sole dependence on petroleum products.
Mr. Adewale-Smatt Oyerinde, the Director General of Nigeria Employers’ Consultative Association (NECA), Mr. Adewale-Smatt Oyerinde, stated that since the past decade the country has spent more than N20 trillion on fuel subsidies while about N15 trillion was spent on capital expenditure, N3.9 trillion on education and N2.5 trillion on health. These budget allocations are seen as misplacement of priority, revealing that significant developmental sectors like education, infrastructure and health have suffered as a result. The NECA boss asserted that the subsidy regime is carried out in secrecy and corruption.
The Director General of MAN, Mr. Segun Ajayi-Kadir, stated that the country’s way of attaining economic growth, sustainable development and industrialization has been jeopardized by lack of attention to growing challenges of the manufacturers who are supposed to propel its economic agenda. His observation revealed that Nigeria has sole dependence on importation of refined petroleum products and other essential manufacturing raw materials without sufficient options. There was a demand for issuance of licenses to manufacturers and operators in the industry to import petroleum products directly.
LCCI boss proposes investment in transport infrastructure.
President of the Lagos Chamber of Commerce and Industry (LCCI), Dr. Michael Olawale-Cole, asserted that more effort should be put in investing in transport infrastructure for resolution to logistical challenges that affects transportation of goods across the country. He added that there could be an enhancement of Nigeria’s Forex earnings through increment in the inflow of foreign direct investments. He emphasized the need for investment in infrastructure and significant port reforms for reduction of hindrances in export logistics and processes for acceleration of nonoil production and exports.