NECA, oil marketers to FG: Shun pride, review fuel subsidy removal, flotation of naira

The Nigeria Employers’ Consultative Association, NECA, has advised the Federal Government to eschew pride and review the removal of fuel subsidy and the floating of nation’s currency, the naira, warning of looming unemployment crisis, particularly with the current harsh economic situation. 4

NECA’s position came on a day oil marketers, under the aegis of the Natural Oil and Gas Suppliers Association of pleaded with President Bola Tinubu to peg the exchange rate of the naira to the dollar at the 2024 budget benchmark of N750/dollar.

‘Anti-business policies of govt’
Reviewing the twin policies of fuel subsidy removal and floating of the naira by the present government, NECA, the umbrella body for employers in the country, lamented that since 2023, government has been implementing policies that do not support operations of the private sector which are the largest employers of labour in the economy.

Director-General of NECA, Mr. Adewale- Smatt Oyerinde, who spoke on behalf of employers in the country, argued yesterday: “Some of the policies that are inimical to business include the currency redesign policy of the CBN, removal of fuel subsidy, floating of the foreign exchange, increase in various taxes, including excise duties and most recently, upward review of the foreign exchange rate for clearing of imports by the Nigeria Custom Service.

“Also included in this is the banning of alcoholic beverage in sachets and pet bottles of less than 200m. These measures are swiftly dragging most private businesses to the brink of collapse. “The National Bureau of Statistics, NBS, reported a rise in unemployment rate to 5.0 per cent in the third quarter of 2023, from 4.2 per cent in the second quarter of the year.

“The figure is a product of the new methodology adopted by the bureau, which defines unemployment as the ratio of the working-age population to the total labour force. Retrospectively, using the old methodology for the last time, NBS reported unemployment at 33.3 per cent for the first quarter of 2021.

“Going by analysis done by Klynveld Peat Marwick Goerdeler, KPMG, using the old methodology, the estimated unemployment rate for 2023 is projected to close at 40.6 per cent, a 2.9 percentage point rise over the 37.7 per cent recorded in 2022. “The rise in unemployment rate by 80 points during the quarter could be a presage of looming unemployment crisis in the country, particularly with the current harsh economic condition.

“Therefore, to circumvent such crisis, it is important to question the causes of the current spike in unemployment rate and decipher solutions to mitigate further degeneration in the index. “Since 2023, government has been implementing policies that do not support the operations of the private sector. Incidentally, they are the highest employer in the economy.’’

While expressing dismay over the recent exit of GlaxoSmithKline, a multinational pharmaceutical company and Procter & Gamble, two companies that had operated in the country for decades, Oyerinde noted: “As the economy stands, there are many more companies to join the exit train or close shop if the current harsh operating environment persists. ‘’The implication of the poor macroeconomic and business environments on employment is grave as many businesses are down-sizing as a way of cutting costs to remain afloat.

Worsening employment index
“The employment index may continue to worsen unless there is a deliberate action to review some of the policies that caused the most recent economic dilemma. To address the challenges of unemployment, government should deliberately address the operating business environment to support production in the private sector, which actually engages in productive employment.” Recommending ways out of the current economi situation, the NECA DG said:

‘’The government should end the monetary rationing which is going on at the moment and ensure that the optimum quantity of money needed to stabilize the economy is in circulation. “The government should review and moderate the fuel subsidy removal. Subsidy is a tool for socio-economic stability and growth – fuel subsidy, unemployment allowance, free medicare, social security allowance, old age allowance, child upkeep allowance are all subsidies. Incidentally, only fuel subsidy existed in Nigeria.

“The government should review the floating exchange rate regime to save the country from monetary collapse. No heavily import-dependent nation such as Nigeria allows its currency to swim in the murky waters and vagaries of the invisible hand; it has to be transparently guided.

“Government should review its stance on the tax credit for infrastructure, mostly on road constructions carried out by private sector. “It should also review its tax projections from the private sector, particularly in the present condition. The truth is that high taxes do not help anybody, not even the government. High taxes, as it is currently becoming, has the tendency to crowd out a swathe of businesses in the country.

“Government should eschew pride and take these actions to improve the operating environment so that businesses can return to improved level of stability that would support decent employment.”

Peg forex rate at N750/dollar, oil marketers beg Tinubu
Apparently considering the impact floatating of the naira has had on their operations, oil marketers, operating under the aegis of Natural Oil and Gas Suppliers Association of Nigeria, NOGASA, have begged President Bola Tinubu to peg the naira at N750 to the dollar. Their appeal came against the backdrop of further crash in the value of the naira to N1,850 to the dollar as at yesterday. NOGASA President, Mr. Benneth Korie, told journalists in Abuja that constant devaluation of the naira against the dollar is at the heart of Nigeria’s economic challenges. Korie, who kicked against free floating of the local currency, said government must be bold in its handling of the foreign exchange market to halt the present slide. He explained that the high cost of the dollar is pushing marketers out of the industry, adding that if urgent steps are not taken, most petrol stations will shut before the end of March.

“I know our budget this year was benchmarked on N750/$, so if the government can maintain it at 750/$, heavens will not fall, inflow or no inflow. “It is not the first time we are seeing prices at N400 and they are selling for N800, so let’s go back and try it, because if we allow this to continue, the dollar may get to what we cannot handle. Now, all our food will be sold at dollar rate if care is not taken. So let us go back to N750 as it was stated in the budget. “You are aware of NARTO withdrawing their services. It is as a result of this high cost of diesel, you cannot go to Lagos to bring premium motor spirit, PMS, or fuel to the north with N1,700 cost of diesel, it is not possible, it is a suicide mission. Nobody will make one kobo, so that NARTO struggle is okay.’’ He urged government to take another look at the deregulation policy, saying it is not working as envisaged. “If government feels it cannot provide subsidies, they can bring the bridging (petroleum equalisation fund) back to the system so that it will reduce the rate, the hardship, because it will help. “We understand that some trillions have been spent on subsidies, so there is nothing bad if we introduce bridging and it will not take up to one quarter of that, it will reduce pressure on transport cost,” Korie said