Inflation, epileptic power, cost of diesel erode gains of doing business in Nigeria | Dailytrust

Inflation, epileptic power, cost of diesel erode gains of doing business in Nigeria

Vice President, Yemi Osinbajo
Vice President, Yemi Osinbajo

In May, 2017, the acting President, Prof Yemi Osinbajo, signed Executive Order No 1, which promotes transparency and efficiency in the business environment.

Ease of Doing Business means a measure of how ease or difficult it is to start or operate a business in a country and this measure can be in the form of an index measured and or provided by organisations such as World Bank, World Economic Forum.

The order mandates Ministries, Departments and Agencies (MDAs) of the federal government to publish a complete list of all requirements or conditions for obtaining products and services within their scope of responsibility (including permits, licenses, waivers, tax related processes, filings and approvals) on their websites.

The order is also targeted at fast tracking the processes of providing a safe and conducive environment for Nigerian businesses to thrive.

However, five years down the line, the current economic realities in the country have made the policy almost non-existent, as Micro, Small and Medium Enterprises (MSMEs), as well as big businesses, operate in a very tough environment, with some even folding up.

Daily Trust checks have shown that inflation, forex scarcity for importers, scarcity of diesel/fuel, among other factors, is hurting businesses in the country, which consequently renders the ease of doing business policy of the government almost non-existent.

Inflation

The National Bureau of Statistics said the inflation rate climbed to 17.71 per cent in May, highest figure in 11 moments.

In Nigeria, a key element of inflation is the prices of food and general goods and services, which have maintained an upward trend for some time.

Over the last seven years, food inflation has averaged 17 per cent – rising, for instance from 9.78 per cent in May, 2015, to 20.3 per cent in November, 2017.

In 2014, the nation’s food inflation was at 9.2 per cent. It rose to 10.4 per cent at the end of 2015; 17.4 per cent in 2016; 19.42 per cent in 2017; 13.56 per cent in 2018; 14.67 per cent in 2019; and 19.56 per cent in 2020.

Food inflation climbed to 20.57 per cent year-on-year in January, 2021, making it the highest in over 11 years. It closed at 17.37 per cent in December, 2021.

In May, however, the food inflation rose to 19.5 per cent amid an increase in prices of staple food across the country.

As a result of inflationary figures from prices of goods and services, MSMEs operating in the country are finding it difficult to maintain their operations and survive.

Fuel prices

In the same vein, checks by Daily Trust show that the persistent unavailability of petrol and diesel has further made it difficult for businesses to survive.

In fact, the current situation is badly affecting banks and airline operators as some of them have cut operating hours as a result of the high cost of diesel and aviation fuel respectively.

Aviation fuel and diesel now sell for about N800-N850 per litre; a situation which nearly forced airline operators to shut down operations.

Similarly, petrol now sells between N185 and N220 per litre at filling stations. However, the major problem has not been the price but the unavailability of the product.

Exchange rate

The naira exchanges between N600 to N610 per dollar; highest ever in the history of the country.

Daily Trust findings have revealed that the major challenge with the country’s exchange rate is as a result of its low productive level and the fact that Nigeria operates a monolithic economy that only depends on oil revenue.

This makes it difficult to sustain due to vulnerability of oil prices in the international market, and the development has also led to a surge on importation bill and more demand for foreign exchange.

Consequently, data from the NBS show Nigeria’s foreign trade deficit expanded to a record N1.94tn in 2021 as the cost of importing commodities exceeded the value of the country’s exports. This shows a 986 per cent wider than a deficit of N178.2bn recorded in 2020.

The country imported N20.8tn worth of goods in 2021, 64 per cent higher than the N12.7tn recorded in the previous year, according to a report released by NBS.

Also, the price jumped 51 per cent to N18.9tn in 2021 from N12.5tn the year before. 

Epileptic power

Epileptic power is gradually making the business terrain difficult for Nigerian businesses.

In many years, power supply has been the bane of businesses in Nigeria, but the problem has taken a dire dimension with the national grid suffering repeated collapse recently thereby shutting down production activities in the country.

Mrs Bola Afeez, who owns a printing company in Nyanya, told Daily Trust that the few weeks of grid collapse had proven much more difficult for her business as poor power supply and the high cost of diesel had combined to put her once bustling factory in fits and starts.

She said, “The past months have been very hostile to business due to poor power supply and the prohibitive cost of alternative source of power. A litre of diesel now sells for N800. There is no way one can break even using N700 a litre diesel to power the generating set for production. So what we do is to consider how we can efficiently manage the situation until things normalise.”

MDAs’ lacklustre in promoting policy

Consequently, a recent federal government report shows that 19 government agencies needed to help improve Nigeria’s conditions for doing business fell short of an agreed complaint resolution time in 2020 and 2021

The MDAs are listed on a government platform called Reportgov, which receives complaints and feedback from the public and passes them to the relevant authorities for action.

This effort is coordinated by the Presidential Enabling Business Environment Council (PEBEC), and the key expectation is for MDAs to respond to complaints within 72 hours as approved by the Federal Executive Council (FEC).

A report, which assesses MDA’s response time and their compliance to President Muhammadu Buhari’s Executive Order 1 (EO1) on the promotion of transparency and efficiency in the business environment noted that agencies were not doing enough to meet the timeline.

Announcing the report, Jumoke Oduwole, the Special Adviser to President Buhari on Ease of Doing Business, said the MDAs were not doing enough to deliver on the 72-hour complaint resolution timeframe.

She said, “MDAs’ compliance with the 72-hour timeline mandated by the Federal Executive Council (FEC) for complaint resolution on the reportgov.ng platform leaves a lot of room for improvement.

“The report shows that all agencies fell short of the timeline for resolution and the result establishes the need to intensify EO1 compliance across all MDAs towards making Nigeria a progressively easier place to do business.”

 

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