Dr Muda Yusuf is Chief Executive Officer, Center for the Promotion of Private Enterprise (CPPE). In this interview with Oluyinka Onigbinde, he speaks on the economy, tariff and taxation issues and the maritime industry.
With the way the economy has panned-out so far since this new government administration, what do you foresee before the year runs out?
So far the steps that have been taken by this present administration are very positive. They are in line with our expectations of reforms in the economy. Before now we had clamored for reforms in our foreign exchange market, as well as oil and gas sectors starting with the fuel subsidy issue and it is gratifying that at least those two major reforms have been undertaken. Although they are still work-in-progress, they are not at the destination yet but I believe that it will impact positively on the economy. We are likely to see more investment in the economy on the back of the foreign exchange reforms. We are planning to see more investment in the Oil and Gas sector on the back of fuel subsidy removal. The removal also has an impact on revenue. If we have an improvement on revenue. we are likely to see an improvement in our macroeconomic environment. It will also help to preserve our foreign exchange. Going forward, we expect that we’ll see more investments in refineries which means that we will import less and even now level of importation is going to reduce drastically because all the corruption component of subsidy is being removed. Before now, they were claiming that we are consuming over 60 million litres per day. I am sure that by the time we go back now and check, the amount of fuel we are consuming will have dropped by almost 50 per cent. So far so good, the major reforms are impressive. The one that is not good is the merger of NIMASA, Customs and FIRS. That one I think we need to sound a note of caution on that because for instance the core area of NIMASA is maritime security and safety. So how do you go and merging them with the revenue generating agencies? Revenue generating is not the core functions of NIMASA. If the government wants FIRS to be collecting all the revenue, they can do that without necessarily merging the institutions. Operationally, I think that may create some problems. So we need to be careful about that aspect of policy that has been mentioned in one or two places. I don’t know whether the government has made up its mind on that, but it is something that needs to be carefully examined and the stakeholders need to be properly engaged
What is your take on the unified exchange rate? Are you in support or do you think this is the best option now?
I’m sure it is the best option. This is the way to go. What we have had in the past is not a transparent process. It was fraught with all manner of corruption and all manner of round tripping; many players in the economy were not having access to foreign exchange and there was acute liquidity problem in the foreign exchange market. Investors are not bringing in their money; even exporters are not bringing in their money because of that policy. So with this unification I think a lot more capital will come into the economy and that will help international trade and the economy is likely to be better for it.
There are concerns that the unified rate may lead to high cost of doing business.
No, that is not correct. The operating or effective exchange rate in the economy today is not $460. It is actually about $700. You can see that even with the unification, the parallel market rate has not changed. You can see that there’s no money because some people are predicting that once they unify the exchange rate in the window, the parallel market rate will move. But the parallel market rate has not moved. We are seeing a convergence of freight. So for me, it is good for the economy and it is only a matter of time. We would see an appreciation of the exchange rate as more inflows come in and as CBN from time to time also intervenes in the matter. And when I say CBN to intervene, I am not saying they should go and be shifting the exchange rate. They should also sell government owned forex at the market rate and that is even more revenue for government anyways.
Some stakeholders have been calling for the review of the 43 items that were banned from FOREX list. Do you think there is a need to review these items?
There is a need to review it, because you cannot be having two separate trade policy documents. We have a trade policy document from the Ministry of Finance which normally specifies that fiscal policy, product that can be imported and the ones that cannot be imported, the tariff to be paid and all of that. We now have this parallel one which was issued by the by the Central Bank of Nigeria. That was an aberration. The institution that has power over what you can import or what you cannot import is the Ministry of Finance and those things are well documented in our fiscal policy document, tariff book, and annual fiscal policy review that the Ministry of Finance issues. They cannot be issuing something and the Central Bank is issuing a parallel document. If you go to Court, the 43 items are not on the banned list. They are not prohibited from import. So the whole idea of the 43 items is just creating unnecessary confusion in international trade for us. If the government sees that a particular product should not come in, let them put it on the import prohibition list so that everybody will know. But when something is not on import prohibition list, and CBN is saying you cannot get foreign exchange, it is a contradiction. This is part of the coordination that the present administration has said it will tidy-up, so that there is proper coordination between the monetary and fiscal authorities. This is a very good example of two institutions of government moving in almost opposite and different directions. So I think it is something that needs to be reviewed and if it is not reviewed, that means if your item is in the 43 items list, it will be going to parallel market and if you are exerting too much pressure on parallel market, the gap between the official and parallel market will now begin to widen again which is not what we want. So it is something that needs to be reviewed.
How would you access Nigeria’s preparedness for intra-African trade under AfCFTA?
We are not prepared. First, institutionally we are not ready. I am not sure many of the institutions are prepared. Even the key stakeholders are still very weak in sensitization. Not many people know what the full outcomes of the protocols of Trade in Goods and Trade in Services are. All those information are not well known to players in the economy. We also need to know the protocols of the destination of our exports, because if you are exporting to Rwanda or Ethiopia, which products can you export that are duty free? Which product can you not export there? These are supposed to be stated in the protocols. For instance in Nigeria, we have the items that are protected which we call sensitive items and we have items that we can trade. So we need such information for all of the countries in Africa. All those information are not in public domain. Not many people have information about that. Customs doesn’t seems to be keen about it because the immediate past Customs CG was saying that AfCFTA will affect Customs revenue. So the Customs itself appears to be keen and excited about the AfCFTA.
The manufacturers too don’t seem to be excited because all their fears which made them to oppose our signing of the AfCFTA, all those issues are still there. They complained about deficit of infrastructure, high cost of production, cost of energy, and multiple taxations that could not make them to be competitive under AfCFTA. All these problems are still there, they’re even going away. So majority of them are not too enthusiastic about it, because those issues they raised have not been addressed. They still have problems of high cost of production and when the cost of production is high, other African countries will just bring in their products and they throw you out of market. That is the danger they are facing now.
What is your take about the Nigerian Customs modernization project?
I think it is something we can handle. We just talked about FIRS. A lot of reforms is taking place in the FIRS. The government feels that the FIRS can do a much better job of revenue collection; that is why some people are promoting this idea of merging FIRS with Customs and NIMASA. So I don’t think we need to engage in that kind of exercise. Although I don’t have the details of that project, but I think there have been a lot of protests even within Customs. There are lots of feedback from the people. But the good thing is that we now have a new man as the CG of Customs. He is a very young man and he is a professional. He is a career person which is what we have been clamoring for. So I am sure that with him in the saddle, some of these things will have to be reviewed. And some of the reforms that are also expected to take place in customs should be put in front. We need to use more technology in the Customs processes. We need to remove all these too many units of Customs examining cargo. We need to fast-track the single-window. All these Custom checkpoints all over the place need to be scrapped. Any container that has been cleared at any port, no Custom should be stopping it on the road. All these reforms are what I am expecting Wale Adeniyi to quickly address things. He has to prioritize trade facilitation. Customs is not only about revenue. That is an agenda we are setting for him. We are happy that a Career person is now at the top.
Owing to the drop in purchasing power, some people have called for a review of the age limit on importation of vehicles. Do you think this present government should consider that?
I think what they should consider is to review the tariff. The tariff is too high. We are talking about a country where we don’t have effective mass transportation system, where almost 90 percent of movement is by road, where there is so much unemployment, where the middle class cannot afford to buy a new vehicle. Right now I think the tariff is about 35 percent; that is too high. There’s nothing that says we cannot do 20 percent so that first the middle-class can also move up in terms of owning their own vehicles. We also have some young Nigerians who want to go into transport e-hailing business. A lot of them are there already but more of them can do it. That will also help to reduce the problem of unemployment. If we have more of those things, the supply of public transportation will increase. With all these fuel crises, if we have more vehicles on the road, the cost of transportation will also come down a bit. So my view is that the government should review the Tariffs particularly on those slower capacity vehicles. Let them be part of the palliatives that Tinubu will give to people and these are quick wins. How much revenue are they going to lose? Nothing significant. And in any case, it will reduce smuggling. The high tariff is encouraging a lot of smuggling. Not less than 15 to 30 percent of vehicles on the road were smuggled. When you look at our exchange rate, you know it has depreciated and you look at the tariff, it is a double jeopardy. It is a different thing if they say it has depreciated because this tariff is based on the current exchange rate. When you have an exchange rate that is already weak, the import duty should not be high especially for our citizens to be able afford new vehicles. I know that people who are producing new vehicles will be kicking against it; saying it will affect them. It is not the same market. Those who are buying new vehicles are not in the same market with those buying “Tokunboh” vehicles. The government should consider it as part of the palliatives. There is nothing that say it cannot be reduced to maybe 25 percent. A lot of citizens will appreciate the government for that. The government should also waive the duty of all the SKD that the vehicle assembly plants are using. The duty should be waived completely to support them. With this, everybody is a winner so that the vehicle assembly plants will not say you are encouraging importation of Tokunboh.
Do you agree with some stakeholders in the maritime industry who are calling for creation of Ministry of Maritime affairs?
I don’t think so. At a time when we were talking about reducing the cost of governance, we need to reduce bureaucracy. We need to reduce all these structures. Right now, we are even talking of merging some ministries. So if we are saying that in one hand, and the other hand we are saying we want a separate ministry, I think what is important is to strengthen the institutions that we have and give them some freedom and more autonomy to be able to function and not bureaucracy. For me, I think that is the way to go because by the maritime people are under the Ministry of Transportation and other parastatals such as the Railway and Waterways. If you look at them, the maritime is the dominant player. There is nothing much is happening the Railway. So I don’t think it is right.
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