…Draws agenda for economic diversification
The Lagos Chamber of Commerce and Industry (LCCI) has faulted the current tax drive which it said focuses more on the investors rather than on the consumers thereby calling for its reversal.
The Director-General of LCCI, Mr. Muda Yusuf who made this call in a statement in Lagos said that the burden of taxation was more on the investors in the economy than the consumers even as he noted that the Federal Inland Revenue Service (FIRS) had scant regard for due process in its drive for revenue.
Yusuf who described the development as disincentive to investment and economic diversification submitted that the three tiers of government targeted investors more than consumers which according to him was not in consonance with best practice principles in taxation.
He said,” In an economy which is almost 50% informal, this structure of taxation is not investment friendly. The formal sector of the economy bears the largest burden of the tax system. The tax policy needs to be better attuned to economic diversification through a reversal of the tax burden from investors to consumers”.
He added that the use of banks as collection agents for the FIRS as obtained currently was very disruptive, distracting, arbitrary, oppressive and unfair to investors arguing that it was a serious disincentive to investment and the promotion of financial inclusion.
“This approach should be discontinued. Taxation should not be seen only as an instrument of revenue generation, it is also a potent instrument for stimulation of investment”, he said.
The Director-General observed that the monetary policy should be designed to drive domestic investment through a moderation of the monetary tightening stance of the Central Bank of Nigeria (CBN) noting that that was needed to moderate interest rate in the economy.
According to him, “It is difficult to drive domestic investment at current levels of interest rate which is well over 25% for most economic players. The economy needs investment, especially domestic direct investment to drive diversification”.
Speaking on the foreign exchange policy, Yusuf pointed out that “A forex regime that perpetuates a rent economy would not serve the cause of diversification”, saying that “It creates opportunities for arbitrage, corruption, resource misallocation, impedes the inflow of investment, and create transparency issues in the allocation of forex”.
“The current multiplicity of rates is inimical to sustainable economic diversification”, he added.
He further described trade policy as a key determinant of the nation’s imports and exports adding that inappropriate trade policies could aggravate the cost of production of economic players which according to him, happens when critical inputs were restricted from imports and local substitutes were grossly inadequate.
“A thorough sensitivity analysis of trade policy impact on the economy is essential before major trade policy moves are made. The same logic should apply to the forex exclusion policy of the CBN. Trade policies should be guided by sectoral competitive and comparative advantage to ensure sustainability. Institutional capacity to enforce the policies should also be considered in trade policy formulation.
“The Nigeria Customs service needs to demonstrate better sensitivity to the plight of investors. One of the biggest headaches of the business community is the Nigeria Customs Service. Policies should be focused on incentivizing resource-based industries which typically has competitive advantage and good impact on the economy because of the high multiplier effect. The relativity of tariffs between the Nigeria and neighboring countries should also be considered in the formulation of trade policy”, he stated.
Continuing, he said, “Procurement policy is another very important dimension of policy that has high implications for economic diversification. The procurement policy should be structured to favour sectors that have the potential to be diversification champions as well as leading backward integration firms. Due priority should be given to patronage of made in Nigeria products as an important component of procurement policy, and should be properly implemented.
“Resource based industries should naturally get preferences in the deployment of incentives. They have to promote inclusiveness, poverty reduction, and job creation. This should be a major focus of investment policy.
“Fixing the country’s infrastructure is at the very heart of building a competitive economy and a fundamental requirement for economic diversification and sustainable job creation. Transformation in the agricultural and manufacturing sectors depends to a large extent on the quality of infrastructure”.
He also submitted that the quality of infrastructure, the quality of policies and the quality of institutions were the three critical factors crucial to drive economic diversification in the Nigerian economy pointing out that “It is crucial to get these key parameters right. It is equally critical to ensure proper alignment among these key variables to ensure sustainable economic diversification”.
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