The incomplete effort of government in ease of doing business
…Interest rate, infrastructures must tackled to better economic growth

By Kayode Ogunwale

 

No doubt efforts taking by the Federal Government on ease of doing business can not be a successful one to revamp industrial sector of Nigeria economy without paying attention to high interest rate, infrastructures deficit (Roads, rail and power), foreign exchange crisis and multiple taxation.
Industrialists nowadays find it difficult to break even due to non availability of avoidable loan (a single digit interest loan), poor power supply which make life difficult for manufacturers has they spend huge amount of money on alternative power supply and state of the road in the country that make things difficult for goods to be moving from one part of the country to the others.
The Presidential Enabling Business Environment Council (PEBEC) was set up in July 2016 by President Muhammadu Buhari, to remove bureaucratic constraints to doing business in Nigeria and make the country a progressively easier place to start and grow a business.
The Council is an inter-governmental and interministerial one which is chaired by His Excellency, Vice President Yemi Osinbajo, and comprises 10 ministers, the Head of Civil Service of the Federation, Governor of the Central Bank of Nigeria, representatives from Lagos & Kano State governments, the National Assembly and the private sector. The Enabling Business Environment Secretariat (EBES) assists the MDAs to implement the reform agenda of the PEBEC.
But some manufacturers believe that the government’s ease of doing business did not cover critical areas affecting their businesses. They believe that double interest rate is one major hindrance to manufacturing survival which government needs to tackled.
Government’s ease of doing business can only come to reality when it reduces interest rate in the country so that manufacturers can have opportunity to borrow cheaper money.
The Central Bank of Nigeria left its benchmark interest rate unchanged at 14 percent on November 21st 2017, in line with market expectations. Policymakers noticed the economic recovery is still fragile and expressed that inflation should be tracked for future monetary policies. Eight of the nine members of the monetary policy committee voted to hold rates, while one voted for a cut. Interest Rate in Nigeria averaged 10.62 percent from 2007 until 2017, reaching an all time high of 14 percent in July of 2016 and a record low of 6 percent in July of 2009.
Financial expert expressed sad feelings over the retention of the benchmark interest rate of 14 per cent alongside other policy parameters by the CBN.
Dr Chijioke Mgbame, Associate Professor of Accountancy, University of Benin, said that it was time to loosen the monetary policy to allow the manufacturing sector to flourish.
Mgbame said that the growth in the Gross Domestic Product (GDP) was a reflection of the stability in the oil sector and the price of oil at the international market.
According to him, the economy should diversify toward more production of goods and services and a loosening of monetary policy will lead to more access to finance.
“Retaining the MPR at 14 per cent is pure conservatism on the part of the policy makers considering the fact that economic growth was still fragile,’’ Mgbame said.
President, Manufacturers Association of Nigeria (MAN), Dr. Frank Jacobs, belief that a cut in interest rate would be the best thing to happen to the economy.
“He said, “It will be the best thing that has ever happened to the economy, particularly the manufacturing sector.
“It is what we have been agitating for since and if the interest rate is brought down, it will be the best decision in the current economic dispensation.”
On infrastructures, MAN believe that there is urgent need to rehabilitate the deteriorated infrastructure to put the country on the path of sustainable growth and development
Its Director-General, Mr Segun Kadiri, gave the advice while reviewing the performance of President Muhammadu Buhari’s administration.
Kadiri said that improved infrastructure would impact positively on productivity as well as enhance the standard of living of Nigerians.
He said that the recent measures taken by the Federal Government had improved GDP growth, enhanced investors’ confidence and gave hope of economic recovery.
The director-general said that government should build on these gains and focus on addressing issues hindering productivity to fast track recovery of the economy.
For better Nigeria, manufacturing sector must not be left out and for relevancy on the sector on Nigeria economy interest rate must reduce to bearable point while government need to upgrade the state of Nigeria infrastructural for economic growth.