Mr. President, let companies breaf

These are tough times!   

One would wish this was all just a horror movie or a bad dream. Much like the traffic snarl on Ozumba Mbadiwe every December, engendered by the influx of Quilox customers, this is real and there is no wishing it away.  

As you may imagine, the hot topic on the agenda in boardroom meetings and strategy sessions across businesses in Nigeria is the delicate balancing of price increases and sustaining consumer demand in the face of depleted purchasing power. Price increases, either contemplated or implemented by companies is essentially an attempt at cost recovery and not a desire to improve margins.  

Decision makers must now urgently embark on a refresher course in ‘’elasticity of demand’’ and perform sensitivity analysis before increasing prices lest they learn the hard way. After all, our reserve knowledge of elementary economics tells us the predictable impact of a price increase on demand. Given the current state of the economy, it is no longer a casual or routine business decision to discuss or implement a price increase. In my view, price increase conversation is now well within the difficulty realm of quantum physics (or anything that sounds more difficult) and should only be implemented with surgical precision. 

I hope I haven’t breached your tolerable limit for economic terminologies in one day.  

Shareholders’ fund is on a sprint to ground zero and below, as companies continue to record losses, or, for those faring better, are watching their margins thin out. In the unfolding chaos, I haven’t come across any comprehensive statement of intent from the government to grant concessions to businesses groaning under the impact of the ongoing economic reforms. In contrast with individuals, the government has repeatedly expressed its commitment to provide social interventions to the poorest citizens. 

But I ask, what is the plan to support businesses to keep them from going moribund? When stripped of its corporate veil, companies are comprised of millions of individuals working to earn a living. Therefore, it goes without saying that when companies cease to exist, the livelihood of individuals forming the workforce is truncated.  

In a bid to keep afloat, companies have resorted to sachetisation in response to the badly degraded consumer purchasing power, while already sachetised products are now nearing extinction given the significant reduction in sachet size. A case in point is the popular ‘’pure water’’ which used to be a perfect square. Pure water is now being redesigned as a ‘’new and improved’’ rectangular product. While some companies have retained the size and shape of their products, we have witnessed alteration in the air-to-content ratio, with more air going into packaging. Given the current tropical climate, we just might find a use for the complementary oxygen. Talk about making lemonade out of lemons! 

Again, I ask, is there any plan to help businesses keep the lights on? Amidst galloping inflation, devalued currency, and increased borrowing rate, the business community witnessed the shocking introduction of a new levy- expatriate employment levy (EEL), which was launched with near pomp and pageantry. Much has been written about the shallowness of the EEL and this article will not bring further sand to the beach of deserving condemnations that trailed the announcement of the EEL. Indeed, it would seem that the government is taking a casual view of the extremely difficult business environment.   

What should the government do? Perhaps it is of prime importance to understand how we got here. We must acknowledge that the current administration, much like its predecessor, inherited a system built on inefficiencies and rigged to deliver an insane amount of wealth, through rent-seeking and outright official sleaze to a few privileged officeholders at the expense of the greater number of Nigerians.  

Further, it is well documented that we have consistently made poor economic choices over the years. Our poor economic choices reflect in the irrational cost of governance, corrupted subsidy cost of fuel, concession agreements that exploited the country, and poor budgeting to mention but a few. For illustration, a glance at our annual budgets would eloquently demonstrate why Nigeria is a long way from prosperity. Nigeria’s 2024 aggregate budgeted revenue is equal to its salaries and debt service commitments (NGN18trn) which it cannot afford to default on. Yet, it is estimated that Nigeria needs between $100-$150bn annually, over the next ten years, to close its infrastructural gap. May I ask that you ignore the ‘’midnight economists’’ who argue that infrastructural investment is not a fundamental recipe for economic growth?  

As the government battles its demon in the form of paucity of funds, it must acknowledge that companies in Nigeria, given the current economic conditions, are embroiled in a similar battle. Therefore, the government must resist the temptation to increase tax rates or introduce new taxes or levies altogether. At every turn, the PMB-led administration made recourse to taxation to augment government revenues. From reawakening the NASENI levy to increasing VAT rate and enacting Police Trust Fund Levy, it was clear that the government prioritized tax revenues above other sources. While experts have consistently called for the widening of the tax net, as against overburdening existing tax-compliant companies through increased taxes, it would appear that the government is addicted to taking the easy way out. Just as the government did not attain the full complement of its oil revenues as it chose to commoditise oil mining licenses, enter into concession agreements and swap deals, it has thus far jettisoned the difficult task of ‘’taxing the untaxed’’ in preference for new levies and increased tax rate. 

As a fiscal policy measure, I recommend that the government should consider reducing the minimum tax rate just as it did during the infamous COVID-19 pandemic or suspend the application of minimum tax for loss-making entities. For the avoidance of doubt, we are in an economic pandemic! 

Further, given that the government did not embark on exchange rate liberalization to maximise revenues, I recommend a discounted foreign exchange rate for import duties relating to raw materials and other items of trade. This would not only bring succour to businesses but also combat the rising (cost-push) inflation much more effectively than increasing the monetary policy rate.   

For once, this is the time to make remarkable efforts toward improving our economic fortunes. There should be no laziness in this dispensation or cliches/soundbites. What exactly are we doing with our solid mineral resources? Are we hawking licenses to foreigners in our usual manner because we can’t do the heavy lifting? Are we plugging loopholes in our oil production/transmission/sales, or we are accounting for bunkering and other associated theft of our oil resources as normal losses? This government or any government whatsoever must tighten its belt before it asks the same of its citizens.    

President Tinubu must realise that his consistent acknowledgment of the biting hardship and confessed empathy will, in no way, reduce our pain. Only well-thought-out and synchronised policies, implemented with ‘the fierce urgency of now’, would count. We have noted President Tinubu’s audacity to make bold decisions in the interest of the future of our country. Indeed, not a few experts agree it was the right thing to do. What some analysts have disagreed with, is the timing and methodology of the economic reforms and not the substance of the economic reforms. Now, we ask to see President Tinubu’s work rate in taking us to the next level through sheer hard work and smart decisions. Less politics, less talk, more governance.   

Nigeria is not more capitalist than the United States of America, yet the latter intervenes in difficult times by providing relief to companies when necessary. 

We are in the middle of a brutal and viral economic pandemic. The government must show good faith and provide relief to businesses rather than the placebo of empathy.

Mr. President, let the companies breathe. Don't suffocate them. You owe them that responsibility.