- Nigeria Faces Weak Investor Confidence Amid Reforms Delay
Economists in the country have warned that the failure of the government to implement key reforms will discourage Foreign Direct Investment and portfolio inflows.
Speaking on some of the risks the country will encounter as a result of inconsistent policies, the Chief Economist, PricewaterhouseCoopers, Andrew Nevin, noted that some of the major reforms required to attract investors were in the energy sector and the foreign exchange market.
He said that regardless of an increase in oil price forecast, excess capacity in the market and downside risks to global growth would defeat the projection.
The economist warned that the inability to meet revenue targets in the budget would require an expenditure adjustment, in which capital expenditure would be impacted.
As such, Nevin said there was a need to keep real interest rates positive and improve the interest rate differential, adding that global interest rates increase would suggest that the Monetary Policy Rate would remain high.
“A failure to implement key reforms, in particular, the energy sector and the foreign exchange market, could keep investor confidence weak and limit Foreign Direct Investment and foreign portfolio flows,” he said.
According to Nevin, data on tax payment in 2015 showed that about 992 organisations out of 994 that paid taxes above N10m were in Lagos.
He said the lopsided tax payment could be fixed by bringing more people into the tax net.
Also speaking on taxation, an economist with the Lagos Business School, Bongo Adi, urged the government to defer the reduction in corporate tax rate for 18 months, while there should be renewed focus on widening the tax net and effective tax enforcement.
In the oil and gas sector, Adi said the basic policies required were full downstream petroleum sector deregulation and provision of incentives for building private refineries.
He stated, “The CBN should immediately restore 95 HS Code items (out of 680 HS Codes under the 41 banned items list) identified by MAN as critical raw materials for industry to “valid for FX” status
“Government should launch a new economic reform programme and signal a bold commitment to investor-friendly economic direction based on attracting private capital from domestic and international investors,” he added.
The International Monetary Fund had pointed out in recent a report that Nigeria needed to introduce immediate changes to its exchange rate policy.
The Fund warned that the country risked worsening forex reserves and exchange rate depreciation if it refused to remove foreign exchange restrictions and unify the exchange rates.
Efforts by the Federal Government to obtain loans from the World Bank and the African Development Bank to fund the infrastructure investment deficit had stalled over economic reforms.