The Lagos Chamber of Commerce and Industry (LCCI) says the quality of the nation’s infrastructure, policies and institutions are crucial to driving economic diversification.
Mr. Muda Yusuf, Director-General of LCCI, disclosed this in a statement on Sunday in Lagos.
He noted that it was crucial to get the parameters right and ensure proper alignment among the variables to achieve sustainable economic diversification.
According to him, the policy mix of monetary, foreign exchange, interest rate, tax, trade, procurement, and investment policies are critical to the economic diversification process and to achieve desired outcomes.
“The monetary policy should be designed to drive domestic investment through moderation of the monetary tightening stance of the Central Bank of Nigeria (CBN).
“This is needed to moderate interest rate in the economy because it is difficult to drive domestic investment at current levels of interest rate which is well over 25 percent for most economic players,” he said.
Yusuf stressed that the economy required investment, especially domestic direct investment to drive the diversification agenda.
According to him, the current multiplicity of rates in the foreign exchange policy is inimical to sustainable economic diversification.
He said that the tax policy should be better attuned to economic diversification through a reversal of the tax burden from investors to consumers.
“The three tiers of government targets investors more than consumers and this is not in consonance with best practice principles in taxation.
“In an economy which is almost 50 percent informal, this structure of taxation is not investment friendly because the formal sector of the economy bears the largest burden of the tax system,” he said.
Yusuf said the use of banks as collection agents for the Federal Inland Revenue Service (FIRS) was disruptive, distracting, arbitrary, oppressive and unfair to investors.
He noted that it was a serious disincentive to investment and the promotion of financial inclusion, adding that the approach should be discontinued.
The LCCI boss also stressed that the trade policies should be guided by sectoral competitive and comparative advantage to ensure sustainability.
He said that institutional capacity to enforce the policies should also be considered in trade policy formulation.
“Policies should be focused on incentivizing resource-based industries which typically has a competitive advantage and good impact on the economy because of the high multiplier effect.
“The relativity of tariffs between Nigeria and neighboring countries should also be considered in the formulation of trade policy,” he said.
He stressed that fixing the country’s infrastructure was critical to building a competitive economy and a fundamental requirement for economic diversification and sustainable job creation.
Yusuf said that transformation in the agricultural and manufacturing sectors largely depends on the quality of infrastructure.
“A key focus of diversification should be on resource-based industries – agro-allied, oil and gas, manufacturing with high local content.
“These sectors will strengthen the capacity of the economy to create jobs, drive inclusive growth, promote income redistribution and generally impact positively on the economy.”
According to him, a lot of potentials still needs to be unlocked in the oil and gas sector, especially in refineries, fertilizers plants, gas-based industries and petrochemicals.
“We need to put an end to being just a crude oil exporter to self-sufficiency in petroleum products and exporter of refined products and other gas related products,” he said.
Yusuf urged agencies of government to be more investment-friendly and demonstrate better sensitivity to the plight of investors towards promoting investment and economic growth.