- Reduce lending rate, boost local products’ patronage, MAN advises
- Economists to CBN: Provide incentives for manufacturers
The World Bank has said that over N4 trillion worth of goods are smuggled into Nigeria every year through the sea ports.
The global financial institution, in its annual report, stated that the activities of the smugglers would further create holes in the coffers of the Federal Government, which it described as a huge harm to the economy.
The revelation was more frightening as it indicated that the annual turnover of the smugglers was more than the nation’s 2017 budget.
Similarly, Nigeria’s investment rate, according to the report of an audit firm, Meristem Group, has dropped by about 23.3 per cent among the sub-Saharan African countries and also dropped by 28.9 per cent when placed beside Brazil, Russia, India, China and South Africa.
The report added that the most populated black nation needed investment and must eradicate smuggling of goods to restore growth, recalliing that in 2016, Nigeria’s economy declined as its gross domestic product contracted by 1.5 per cent year-on-year. The fall, according to the report, was caused by the two years decline witnessed in export revenue.
“The Foreign Direct Investment dropped to the lowest in 11 years and a collapse in investment as a share of the GDP also dropped by 12.6 per cent. This is as a result of the activities of smugglers in the country,” it stated.
MANUFACTURERS KICK
However, manufacturers in the private sector have frowned at the development, alleging that the government lacked the political will to tame, much less eradicate the activities of smugglers across the country.
To curb the menace, members of the Manufacturers Association of Nigeria explained that the increasing interbank lending rate, which has been between 20 and 30 per cent, should be slashed to a single digit. If that is done, they argue, the cost of production of Made-in-Nigeria goods will drop and more people will be able to afford them, shunning the imported goods.
President, MAN, Mr. Frank Jacobs, thus appealed to the Monetary Policy Committee to review the lending rate downward at its next meeting.
“The high interest rate regime had stifled growth, productivity and competitiveness of manufacturers. With the appreciation of the naira and further drop in inflation rate, friendlier policies that would stimulate economic growth and boost production should be embraced.
“The apex bank should create five per cent concessionary interest rate for manufacturers to drive the nation’s diversification agenda and increase contribution to the Gross Domestic Product. If manufacturers have access to low interest rate as done in other climes, we will be able to employ more people and create wealth for the nation through tax.
“With concessionary interest rate, manufacturers would be able to expand their businesses, create wealth, boost productivity and catalyse economic transformation,” he said.
Director-General, Lagos Chamber of Commerce and Industry, Mr. Muda Yusuf, said the government should drastically slash interest rate in order to stimulate economic recovery.
He said, “What is important is to inspire the confidence of investors and call on more investment in infrastructure.”
Yusuf added that the rising inflation is cost-driven, owing to duties paid by manufacturers, who import critical raw and packaging materials, adding that the government should review the shipping charges and charges imposed by terminal operators so that the cost of manufacturing can go down.
“Government must also ensure that its officials at the port are re-orientated and equipped adequately to tame the activities of smugglers,” he added.
CONSUMER’S PURCHASING POWER IS PARAMOUNT
The Chairman of Chanchaga Glass Company Nigerian Limited, Chief Nathaniel Udoma, said until the purchasing power of the consumer is enhanced to be able to afford locally made goods, achieving growth for the economy is an illusion.
He explained that it does not make any sense for manufactured goods to be lying in the warehouse because inflation is making it impossible for buyers to go for them, whereas the buyers are being asked not to go for the smuggled goods, which is cheaper.
“No economy that discourages the real sector from having access to loan facilities witnesses actual growth. The authorities are not saying anything on the high interest rate and lending rate, which is still debarring manufacturers from expanding their production lines, but is busy fighting smugglers,” he chided.
A director with the MAN, Mr. Clement Anyahie, said until there is a single digit in both the interest rate and inflation rate, the expected growth in the economy would not be achieved in recorded time. “Government has listened to MAN on the aspect of making dollar accessible to the manufacturers, but reducing multiple-taxation in the system is still an issue that must be addressed before tackling smugglers,” he said.
ECONOMISTS KNOCK CBN
A professor of economics, University of Uyo, Akwa Ibom State, Leo Ukpong, explained that an emerging economy like that of Nigeria needs to be giving incentives to various sectors contributing to its growth. He said, “The interbank lending rate is usually a phenomenon in every economy, which is expected to rise minimally any time policy makers try to re-gig monetary policy of the country under reference.
“The apex bank of such a country achieves cash mop up each time it sells Treasury Bills, or other financial instruments. But the frequency with which the CBN is driving the policy, by constantly churning out Treasury Bills, as well as its weekly pumping of dollars into the system has created some sort of pressure and anxiety on the manufacturers and even the bank managers and their investors.”
“The first thing the government has to do is to design policies that will keep people in employment. We must have a very strong short-term and long-term economic growth policy. Short term is to start implementing the budget especially the part that has to do with construction and privatisation.”
The policy was also given a knock by an economist and financial analyst, Mr. Henry Boyo, who described the practice as having taken away core banking business from the practitioners.
“The banking system is being forced to let go its duties, which is to help start-ups with the needed funds to be up and doing,” he said.
