The year 2024 was a tough one for businesses operating in Nigeria, and NACCIMA has listed high inflation, increased borrowing costs, and currency devaluation as top of the reasons the private sector recorded unsatisfactory economic performance in the past year.
NACCIMA said all data, metrics and statistics have confirmed that the Nigerian private sector bore fully the negative burdens of the nation’s current economic reforms.
National President of NACCIMA (Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture), Dele Kelvin Oye, in a statement emphasized the urgent need for economic reforms to address imbalances threatening the private sector and avert further economic strain on the private sector in the new year.
Nigeria, Oye noted, boasts huge potential, innovative private sector minds, capital and opportunities, and so deserves a listening economic team and team players who must recognize the private sector as stakeholders.
“We should agree that the 2024 economic performance was unsatisfactory for the private sector. All data, metrics and consequent statistics confirm that the Nigerian private sector has borne fully the negative burdens of the current economic reforms,” Oye said.
In contrast, the NACCIMA President said, the Nigerian public sector continues to thrive and expand, with all economic benefits of the recent economic reforms have been translated to the public sector through high capital transfers and revenues.
“The private sector faced higher inflation, higher cost of borrowing/repayment for existing loans, the 2.4 billion USD CBN unpaid forwards, currency devaluation and higher costs in all sectors of the economy,” Oye said.
“This continued imbalance caused by increased public sector expenditure has destroyed value in the private sector due to excessive fiscal deficits which are financed through government borrowing at very high unsustainable interest rates,” he said.
Offering short- to medium-term recommendations, Oye said the solution to high interest rates and high inflation was for the public sector to spend less and to start becoming an efficient productive unit.
“Fiscal deficits arise when public sector expenditure exceeds public sector income. The funding of these fiscal deficits through borrowing results in high interest rates and high inflation,” he said.
He debunked the myth of the government earning more revenue under the pretext of improved productivity, saying categorically that payment of customs duties and taxation were not due to improved government productivity.
“These revenues are purely private sector revenues which constitute a transfer of wealth and capital from the productive private sector to an ever expanding unproductive public sector. The public sector does not own factories nor does it produce any goods and services sold to the customers. Rather it extracts value from the citizens through regulatory fiat. Awarding contracts is not the same as enhancing production,” he said.
For 2025, Oye noted that the expenditure framework was skewed towards huge capital transfers to certain sectors which would not add value to the national wealth, adding that the payment of high interest rates to local and overseas creditors regardless of asset class was close to financial “hara-kiri”.
“Financial assets (loans) should be created and counterbalanced by equivalent investment in productive assets which are expected to repay the loans.
“If these assets are offloaded to the capital markets, it will be possible to transfer many unproductive public sector loans off balance sheet thereby unburdening the government from excessive borrowing. Please note we do not advocate transferring public monopoly to private monopoly or creation of private uncompetitive markets.
“Government should learn from past experience and avoid engaging in new ventures that will create further bad loans. Liquidity, lower interest rates and regulation of public sector borrowing by the Central Bank,” he said.
Oye said aggressive repayment of domestic loans using the excess revenues would result in lower interest rate payments which would in turn lead to more cash flow for FAAC and lower borrowing requirements.
“Early repayment or transfer of government loan assets will improve liquidity and result in cheaper, single-digit loans to the private sector.
“Generally, public sector loans must be secured with real assets or must be within the tenure of the government. Longer-term loans must be investments in real assets and not on the government balance sheet. This shift would promote private sector growth and ensure that capital is allocated efficiently,” he said.
The NACCIMA boss said Nigeria’s successful Eurobond offer was received with mixed feelings as “the nature of oversubscription confirms the coupon offered was beyond market offers”.
“Perhaps we need to consider a hybrid offer which allows a Dutch auction that mops up the best offers at each coupon level. The successful bidders made instant profits overnight on the offer.
“The government should be looking to reduce financing cost on an aggressive basis where possible. Because, while the improved liquidity gives the government access to international financial markets, they do not guarantee long-term economic stability. Relying heavily on foreign borrowing may expose the country to external shocks and currency fluctuations,” he said.
