The recent observation by the Arewa Consultative Forum (ACF) on the 2022 budget, to the effect that the federal government should reduce the interest rates to enable growth of small and medium businesses, in a bid to reduce kidnapping and other crimes, deserves necessary attention by the monetary authorities.
ACF National Chairman, Chief Audu Ogbeh, who commended President Muhammadu Buhari for the budget presentation, noted that high interest rate will not only stifle access to credit, businesses and the economy,.but it would also have adverse effects on the younger generation and force them to engage in crime to make money.
Ogbeh said, “I congratulate President Muhammadu Buhari for his presentation of the budget estimates of the 2022 fiscal year. The Forum appreciates the desire and commitment of his administration to take steps to expand and concretize the infrastructure base without which economic growth will be a mirage.
“We also want to commend government on the new onslaught on bandits and criminals nationwide. We are however worried that no mention was made of the problem of interest rate. For nearly three decades, we have endured the most outrageous interest rates that any developing country can endure. .
“How can we continue to pay lip service to the vital issue of the growth of Small and Medium Scale Enterprises (SMSEs), the prosperity of the younger generation, if we make it impossible for them to access credit..
“We appreciate the efforts of the Central Bank of Nigeria (CBN), but we regret to say those efforts will not solve the problem when commercial banks are still charging 27-30% (as interest rates). What kind of business will anybody do with such interest rates?.
“We wish to caution that that unless and until we hurriedly establish a mechanism to deal with the current national tragedy where our children have resolved that the fastest way to their personal economic recovery is kidnapping, the Nigerian economy cannot experience real growth if access to reasonable credit remains forever blocked.”
Coming on the heels of the ACF’s budget observation, Dr Ngozi Okonjo-Iweala, Director-General of the World Trade Organisation (WTO), had said Nigeria’s trade cost is too high and needs to be cut down to facilitate local and international investment.
Okonjo-Iweala stated this via a video link on the second day of the midterm ministerial performance review at the Presidential Villa, Abuja.
In June, the former finance minister said trade costs could be managed through channels like the African Continental Free Trade Area (AfCFTA), improving internet infrastructure to boost e-commerce, implementing regulatory reforms, and developing infrastructure in ports and roads.
Speaking virtually, the WTO DG said a lower trade cost from the factory or farm gate to the final consumer will attract trade-oriented investment into the country.
“Improving security and lowering transactions for foreign and domestic investments would be necessary,” she said.
“Nigeria is part of a group of countries negotiating an agreement on investment facilitation at the WTO. Once this agreement is negotiated, gratified and implemented, it could be instrumental in attracting additional trade-oriented investment.
“To complete investment facilitation, Nigeria has to cut down on trade costs. Infrastructural costs, linkage costs, regulatory costs, customs costs, basically all costs associated with moving goods from the factory or farm gate to the final consumer. Nigeria’s trade costs are too high.”
Quoting the World Bank trade database for 2019, the WTO chief said trade costs for African countries are on average the equivalent of a 304% tariff.
For Nigeria, she said trade cost is slightly higher at 306 percent.
“These numbers are one and half times higher than the trade cost of high-income countries,” Okonjo-Iweala added.
“Such high costs are not conducive to forming regional value chains, congestion and capacity constraint of high cost in our ports make lives difficult for anyone seeking to base supply chain operations in Nigeria.”
According to her, Nigeria and other African countries need to implement the WTO trade facilitation agreement to help harmonise customs and transit procedures by reducing logistics and dramatically increase the potential income gains resulting from the AfCFTA.
“The WTO trade facilitation agreement facility has already worked with 44 African countries on their implementation efforts and stands ready to help Nigeria upon request,” she said.
“Nigerian businesses need to upgrade product quality to gain market share with better quality will come better reputation and branding and opportunities to capture more values from the products they make.
“In this regards, I must cite the micro small and medium enterprises (MSME) in the food, textile and fashion businesses, the quality of their products have improved considerably over time, thanks to the support of the ministry of industry, trade and investment and Nigeria Export Promotion Council.
We acknowledge the determination and strides of Mr President to fulfil one of his mandates to build a virile and robust economy for Nigeria, which is exemplified in the early presentation of the 2022 budget to the National Assembly in order to return the nation’s budget circle to January – December and achieve substantial implementation.
However, these lofty intentions should not be sacrificed on the altar of prudence and pragmatism. Thus, we advise the presidency to look into the observations raised by ACF and Okonjo-Iweala with a view to making necessary amends.