The Lagos Chamber of Commerce and Industry (LCCI) has raised the alarm that high excise duties on locally-produced goods and challenges of exporting made-in-Nigeria products, as well as the inaccessibility of the Lagos ports on account of the bad roads, have created an excruciating business environment, which has seriously hamstrung business activities in the country and eroded the country’s capacity to compete.
The LCCI, whose position was contained in a report titled, ‘Infrastructure Deficit in Nigeria: The Way Forward, the LCCI,’ decried the challenges of exporting made-in-Nigeria products to other ECOWAS countries and poor investment climate.
The report acknowledged that infrastructure play critical role in promoting economic growth, improving standards of living, poverty reduction and competitiveness, while also contributing to environmental sustainability.
It, however, regretted that in spite of its overarching importance to Nigeria’s economic development, it was evident that there was a huge infrastructure gap in Nigeria, when viewed against the backdrop of lack of competitiveness of the local businesses.
According to LCCI, the situation has “hindered the country’s desire to exploit its rich human and natural resources to stimulate growth and development.
It said, “For in instance, in spite of the country’s huge oil and gas and hydro resources, Nigeria cannot generate electricity to drive its development. Indeed, the country’s infrastructure deficit has stymied the economic growth,” adding that the challenges of the absence of critical infrastructure has continued to impact negatively on the cost of doing business, investment and capital inflow into the country.
It noted that the World Economic Forum (WEF) had in its 2017-18 competitive index ranked Nigeria’s infrastructure low (131 out of 138 countries),while the 2017 WEF Executive Opinion Survey, noted that poor supply of infrastructure is one of the biggest constraints on doing business in Nigeria.
The LCCI also noted that according to the FDC Monthly Economic (a publication of Financial Derivatives Company) report for February 2018 edition, Nigeria requires over $15 billion (about N4.59 trillion at N306 to per dollar) worth of investments in infrastructure annually ,for 15 years in order to adequately develop its infrastructure nationwide.
LCCI said, “Under investments in infrastructure in Nigeria over the years had widened the infrastructural gap across the country,” adding, “Federal government’s limited access to foreign credit and revenue constraints had made it difficult for the country to source funds to meet its infrastructural needs.”
“Under-investment in the nation’s infrastructure has left it with a core stock of infrastructure of just 20 per cent to 25 per cent of the Gross Domestic Product (GDP), compared to an average of 70 per cent of the GDP for more advanced middle-income countries of similar size,” LCCI added.
On the excise duty rate on locally produced products, the report noted that recent measures announced by the federal government may harm local manufacturers and thereby vitiate the government’s effort to make Nigerian companies competitive.
“The government recently commenced the enforcement of the approved amendment to the excise duty rates for alcohol beverages, spirits and tobacco in Nigeria.
“However, we are worried over the move to extend the duty to cover several other basic items. For instance, the Nigerian Customs Service (NCS) excise duty list on its website is inclusive of many basic and essential products such as: soap and detergents, toilet papers, cleansing or facial tissues and Spaghetti/Noodles. These are products consumed largely by ordinary Nigerians,” the report said.
The report cautioned that any imposition of excise duty on these products would further aggravate poverty situation in the country and undermine the welfare of the citizens, just as it will precipitate drops in the demands of these products, and consequently, will result to the increase on the unsold inventory.
Currently, the poverty incidence in the country is well over 60 per cent, and according to LCCI, food inflation is still a great concern as reported by the National Bureau of Statistics –13.16 per cent in August, 2018 as against the core inflation of 10.02 per cent and headline inflation of 11.23 per cent.
The most vulnerable sector of the Nigerian economy is the manufacturing industry subsector, which is already grappling with high operating cost, high energy cost, weak purchasing power of consumers, unfriendly tax environment, high regulatory compliance cost and influx of smuggled products and high cost of logistics.
Against the backdrop of the debilitating situation of the manufacturing business in the country, LCCI said , “ if the government cannot give tax incentives to manufacturing firms ,it should not impose additional tax burden on them given the challenging operating environment for production in the economy,” adding that “It is even worse when such burden is on necessities consumed largely by the ordinary people.”
“We therefore, request an urgent rethink of the proposition to increase or impose excise tax duty on the production of basic needs in the economy,” the chamber said.
On exports to other ECOWAS countries, LCCI noted that with concern of the growing complaints by exporters of difficulties of exporting goods from Nigeria to other West African countries due to poor administration of ECOWAS Trade Liberalisation Scheme (ETLS).
It urged the government to move the administration of ETLS from the Ministry of External Affairs to Ministry of Trade and Investment as this will potentially help to improve the administration of the scheme in order to serve exporters better.
The Lagos chamber also asked the Federal Government to urgently address the challenges of ports access roads on the country.
While acknowledging that the ongoing repair of Apapa roads by some private companies’ collaboration with the Nigerian Ports Authority (NPA), it noted, however, that perennial challenge of trucks traffic on the ports access road would remain until the Tin Can road is fixed with adequate packs with trucks-cull up system is implemented.
It also drew attention to the political instability in the country and the implications for economic growth and development.
“There is a strong nexus between political instability and economic progress,” the report said, adding that “an unstable political environment naturally escalates the risk of investment, creates anxiety and undermines confidence of investors.”
LCCI urged political actors to demonstrate restraint and refrain from activities that could undermine the stability of the polity and created avoidable social tension.