The Centre for the Promotion of Private Enterprise has urged the Federal Government to deploy measures such as the introduction of tax incentives for low-income employees and small businesses and the reduction in import duty on certain products to mitigate the effect of the current reforms on Nigerians.
According to the economic and private sector think tank, the administration of Bola Tinubu needs to promptly deploy these measures to address the social outcomes of its recent reforms, especially the inflationary pressure induced by the fuel subsidy removal.
It stated that urgent measures need to be put in place to mitigate the soaring cost of living and the escalating operating and production costs, especially for businesses.
The Director/Chief Executive Officer, CPPE, Dr Muda Yusuf, stated this in the centre half-year economic review.
He said, “The Tinubu administration needs to promptly deploy measures to mitigate the current headwinds inflicted by the current reforms.”
“The interventions should be a mix of direct interventions, tax incentives for low-income employees and small businesses, reduction in import duty on some critical intermediate products for key sectors of the economy, import duty concessions for the transportation, health, power, and energy sectors.
“The improved fiscal space created by the reforms should make these mitigating measures feasible and they have to be implemented urgently in order to give the current reforms a human face.”
He noted that inflationary pressures may intensify in the near term, with the country's exchange rate coming under pressure in the short term as forex demand backlog exerts pressure on the official forex window.
He stated that this pressure is expected to ease before the end of the year and would pave the way for an equilibrium exchange rate that would be more tolerable and sustainable.
He explained that the Central Bank of Nigeria should establish a sustainable intervention framework to moderate the volatility in the forex market.
Yusuf, said, “With a better fiscal space, the outlook for lower fiscal deficit, moderation in the growth of public debt, reduction in debt service burden, and an improvement in the macroeconomic stability are very positive.
All of these would impact on economic growth prospects in the second half of the year.”
According to him, the recent reforms by the new administration will chart a new and positive course for the economy which should lead to recovery and growth. He noted that the Nigerian economy was impacted by the ongoing Russian-Ukraine war which continues to exacerbate energy costs and fuel global inflation; the persistent monetary tightening in the advanced economies; and the worsening geopolitical tension triggered by the war in Ukraine.
Yusuf added that the tightening of global monetary conditions is making access to global capital costly and difficult for developing economies, triggering global capital flow reversals from emerging economies.
He asserted, “On the domestic front, the major headwinds to growth were the naira redesign policy of the central bank, persistent dysfunctional foreign exchange policy, the political transition processes, weak recovery of oil production, and the intractable challenge of insecurity in parts of the country.”