The Centre for the Promotion of Private Enterprise (CPPE) has called on the federal government to commence economic reforms that would consolidate the power sector reform and enable the full implementation of the Petroleum Industry Act (PIA) in 2023 in order to improve productivity.
This view was expressed by an economist and Founder of the CPPE, Dr. Muda Yusuf, in the CPPE’s “Economic Review for 2022 and Agenda for 2023,” in which he noted the need to further reform Nigeria’s current tax regime because it was stifling investment.
Yusuf argued that, “an economy that desires job creation, economic inclusion, investment growth and poverty reduction, should have an accommodating tax regime for investors.”
He stated clearly that economic reforms were now a matter of categorical imperative for the country in order to unlock growth and investment in 2023.
He said: “The enactment of the Petroleum Industry Act (PIA) was a major step towards the reform of the oil gas sector. But we need to see greater commitment to the implementation of the PIA. The deregulation of the petroleum downstream sector is a major economic reform imperative.
“This is inevitable if we must unlock investment in the sector and put an end to the perennial fuel scarcity and the monopolistic structure of the sector.
“There is a need to also consolidate the power sector reform. An enabling environment must be created to sustain current private sector investment in the sector and attract new private capital to the electricity sector.
“Urgent reforms are vital with respect to electricity tariff, metering and deepening of energy mix. We need robust incentives [fiscal and monetary] to boost private investment in renewable energy.”
He urged the government to reform the budget and appropriation processes to prioritise infrastructure financing and human capital development.
“This would boost productivity and competitiveness of the economy. Adoption of these reform initiatives would guarantee progression towards fiscal consolidation, reduction in fiscal deficit, diminishing need for borrowing and abating debt service burden,” he said.
Yusuf also noted that the current Cash Reserve Ratio (CRR) of 32.5 per cent and Monetary Policy Rate (MPR) of 16.5 per cent imposed on the Nigerian banks are among the highest globally, and has become a key impediment to financial intermediation by the banks.
“Even more disturbing is the fact that effective CRR is as high as 50 per cent or more for some banks. The high CRR has made it difficult for the banks to play their primary role of financial intermediation.
“Ways and Means finances of the apex bank pose greater liquidity and inflation risk to the economy than bank deposits. We seek a reduction in CRR so that the banks can be better placed to play their primary role of financial intermediation in the economy,” Yusuf said.
He stressed that effective corporate tax was much more than that to about 34 per cent even though corporate tax in Nigeria is 30 per cent.
He said: “There is need for an urgent review. The current tax regime is in conflict with the National Tax Policy which prescribes that there should be less emphasis on direct taxation in order to incentivise investment.”
Yusuf also stated that the maritime sector remains a very crucial sector in the Nigerian economy. He pointed out that it was a sector where reform imperatives have become very urgent because legacy trade facilitation issues had persisted and becoming intractable.
“There is a pressing need to ease the cargo clearing processes and vessel turnaround time at our ports. These are major components of ease of doing business to which government had severally expressed commitment,” he said.
He emphasised that the credibility of the 2023 elections would be of contextual significance for the economy in 2023.
“The quality of the democratic transition and choices would significantly impact economic outcomes in 2023,” he noted.