Boosting Nigeria’s business confidence index
A recent survey conducted by the Lagos Chamber of Commerce and Industry (LCCI) revealed that Nigeria’s business confidence index (BCI) took a plunge in the fourth quarter of this year; falling from 24% recorded in the third quarter to 17.6%. It is remarkable that the BCI had experienced impressive and steady growth over the first three quarters of the year. The BCI grew from 10.5 per cent in the first quarter to 16.5 per cent in the second quarter and up to 24 per cent in the third quarter.
BCI is an economic indicator that measures the degree of optimism on the economy that business operators express through the level of their activities, investments and expenditure. When there is a decline in BCI it points to a likely slowing of business activities. Conversely, when BCI is looking up, it reveals that business activities will likely increase and will impact the economy positively.
It is disturbing that the BCI revealed that the manufacturing sector had a negative (-2%) confidence level. Indeed, in the last one year the manufacturing sector has been on the bottom rung of the BCI league oscillating between negative and neutral confidence levels. For manufacturing, their perennial albatross remains the unbridled influx of imported and substandard products, poor access to patient credit, high cost of doing business and stifling regulatory environment.
Other reasons for the general decline in BCI according to the LCCI report can be located around factors like challenging security situation, dwindling public power supply and the increasing spate of non-performing trade credit. And the uncertainty over the long delayed Petroleum Industry Bill (PIB), the recently introduced 50 per cent Cash Reserved Ratio (CRR) on public sector deposits by Central Bank may be taking their toll on the state of businesses.
While we admit that this slump in general business confidence level or the long negative business confidence index for manufacturing may not reveal a medium or long term picture for the state of the business environment, we are worried particularly over the significant 6.4 points fall in BCI from the third quarter to this quarter.
It is because of this situation that we received with cheer the reports that the federal and state governments through the recently inaugurated ministerial implementation committee on the harmonization of taxes and levies across the country is set to end the stifling regime of multiple taxation on in the country.
Over the years the Manufacturers Association of Nigeria (MAN) has made complaints and representations to the federal government on the negative impact multiple taxes have on their activities and how these negatively affects their capacity for increased investments and job creation.
MAN has reported that in some states in the country there are as many as 97 different taxes, levies and charges that are imposed on businesses. MAN equally believes that the costs associated with the administration of these numerous taxes, and of their payment, are far more than the benefits that governments or businesses derive from these taxes. Giving credence to the wasteful nature of these multiple taxes and levies, the World Bank has reported that for every N100 that businesses had to pay in taxes, they paid about N35 in compliance costs. Okonjo Iweala, the finance minister and coordinating minister for the economy rightly remarks that this is a waste of capital. Such funds can be reinvested by these businesses, growing and empowering them to create improved capacity for job creation.
We believe that if the issue of multiple taxation is put to rest, businesses will experience a major relief, thus boosting entrepreneurial confidence, creating an enabling environment for both local and foreign investments, with attendant multiplier effects on the economy. We therefore urge the ministerial implementation committee on harmonizing taxes and levies to move really fast, beyond lip service, and end this frustrating regime of multiple taxes and levies in the country.