Power sector crisis threatening business, economic growth – NACC boss – Punch Newspapers

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Acting Director-General, Nigerian-American Chamber of Commerce, Wofai Samuel, in an interview with KOLAWOLE OLANIYI, discussed pertinent issues affecting the Nigerian economy and the role of the chamber in fostering trade
The annual inflation rate in Nigeria increased to 19.64 per cent in July 2022, the highest since September 2005. Meanwhile, the national debt hit N41.6tn in the first quarter of 2022, compounded by 33.3 per cent unemployment rate. How concerned is NACC about these negative indicators?
This is definitely a source of concern as Nigerians have also had to deal with the rising cost of goods and services following the Russia-Ukraine war, which has caused a significant rise in energy prices, spiralling into a global energy crisis and food supply issue. Another source of worry may be related to the continuous deterioration in the country’s macroeconomic performance during the past five years. Creditors are often concerned about debtor countries whose economies are not well managed and perceive them as risky borrowers.
To change its perception as a debt-risk country, Nigeria needs to manage its debt very prudently and avoid a return to the era of the early 2000s when the country’s debt to GDP ratio was almost 60 per cent.  Nigeria should reduce the high governance cost and rein in corruption and promote faster economic growth.
What pro-market and pro-investment policies does the chamber want to see the Nigerian government implement?

The government should encourage Foreign Direct Investment through financial incentives, well-established infrastructure, desirable administrative processes and regulatory environment, educational investment and political, economic and legal stability.  Positive outcomes of investment are not automatic for countries, and they depend on policies and other factors. Specific industrial and macro-economic policies must be used to attract and upgrade FDI and enhance linkages and spill-over to domestic firms.
The nation’s industrial policy should offer permanent or temporary tax concessions to multinational companies and impose performance requirements. The government should also encourage the interaction among multinational firms, research institutes and domestic firms through linkage programmes, among others. As a trade policy instrument, the establishment of free trade zones or export processing zones in countries with stable economic environment and commitment to trade liberalisation will also attract export-intensive growth. Others can include revamping infrastructural and human capital resources as well as reviewing foreign exchange policies.
As a 62-year-old organisation and the oldest bilateral chamber in West Africa, can you briefly recall some of the success stories of NACC in fostering trade and development in Nigeria?
The chamber has put together trade missions to the United States, leveraging on the Africa Growth & Opportunities Act, a U.S. Trade Act enacted on May 18, 2000 as Public Law 106 of the 200th Congress, and has since been renewed to 2025. The trade missions for our members have helped them to minimise risks in exploring new markets by further exposing their platforms to new market opportunities.
We have a trade mission underway to Miami, Florida, and it is scheduled for October 8 to 15, 2022. The chamber will be taking almost 20 delegates on its trade mission, with an additional opportunity to attend the Annual AfrICANDO Trade & Investment Conference and Expo.

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In the area of networking, the chamber has organised a series of trade conferences, seminars and fora with financial, multi-national and diplomatic institutions like The African Export-Import Bank, the United States Consulate General, Chevron, the United Bank for Africa, and the Nigerian Export Promotion Council, to name a few.
All of these have served as channels for members of the chamber to explore new relationships, learn new skills important to growing their businesses and meet new people. The chamber also launched Project 13-13-13 in its recent retreat. This is a roadmap and a guide for future engagements which, if successful, will be a model to bi-lateral chambers across the country and the West Africa region.
Some advocates of ultra-nationalism believe that opening up the economy through trade has zero-sum consequences. Economies that are well industrialised, they say, have the wherewithal to widen market inequalities. Does the NACC have effective strategies to ensure that trade alliances and partnership between Nigeria and the U.S. are positive-sum?

The United States has been a long-standing partner and friend of Nigeria from independence, supporting our economic and social aspirations. The country is the U.S. second-largest trading partner in Africa, with two-way trade between both nations totalling over $10bn in 2019. The United States is one of the largest foreign investors in Nigeria with its FDI totalling $5.5bn in 2019.  As a result, our alliances and partnerships cannot be over-emphasised.
Little wonder Vice President Kamala Harris of the United States, on September 2, 2022, said, “More broadly, Africa’s leadership is key to confronting all of the global challenges we face, and to that end, Nigeria is key.”

Trade is central to ending global poverty. Countries that are open to international trade tend to grow faster, innovate, improve productivity and provide higher income and more opportunities to their people.
The evidence on this is clear with industrialised economies like the United States, the United Kingdom, Germany, Japan, and France and newly industrialised economies like Malaysia, South Africa, Thailand, Brazil, among others. Our strategy to ensure that trade alliances and partnership between Nigeria and the U.S. are productive is mostly tailored around consistent analysis of outcomes of the alliances already formed.  These reviews create room to improve upon what is existent, inquire from our partners on what value they would like to see from their alliances and further strengthen the engagements and activities around these value propositions.
What is the position of the chamber on the African Continental Free Trade Agreement, going with the understanding that industry operators like the Manufacturers Association of Nigeria had one time been opposed to its implementation?
The chamber was excited about AfCFTA from when it was founded in 2018, and has worked closely with institutions aligned with AfCFTA.  One of such is the African-Export Import Bank. One of the many moves we initiated with AFREXIM is the collaborative breakfast meeting we held, charging trade experts and the  government to deploy mechanisms aimed at maximising the opportunities of AfCFTA one year post-implementation. Our call became pertinent following observations that the country was not harnessing the benefits of the AfCFTA due to structural and trade-related issues such as inadequate payment system integration, logistics and trust.
Nigeria needs to utilise the Pan-African Payment and Settlement System, a product of AFREXIM Bank, which is an efficient payment system to facilitate intra-African trade. This is one of the key supporting pillars of AfCFTA, a platform that facilitates instant cross-border payments in local African currencies. We highlighted that the platform, if utilised, would save African traders $5bn annually in currency convertibility. Under AfCFTA, West Africa will see the biggest decline of 12 million people living in extreme poverty—more than a third of the total for all of Africa.

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Nigeria’s annual GDP growth averaged 7 per cent between 2000 and 2014. The highest we’ve had in the last 3 years is 3.65 per cent in 2021. How can the country’s growth return to the glorious era of the 2000s?
These are crucial times, with great challenges, no doubt. But there are opportunities for gains ahead. If our leaders put in place policies to revitalise the economy and also address shared priorities in the near, medium and long terms, there is a chance to fuel confidence and build resilience –the key ingredients for economic growth now and in the future. One, we need inclusive growth. To achieve this in the country, there is a need to bring on more unbanked transactions via SMEs growth through interest-free and collateral-free loans. Most immediately, Nigeria must ensure economic growth is more inclusive.
Good reform in the energy sector is going to be paramount. The cost of doing business is very high on account of the inefficiencies of the power sector. Getting policies to make sure that the country resolves this case once and for all is also important. The Federal Government should  enhance factor quality by strengthening land tenure security, improving educational outcomes, liberalising trade regime and enhancing trade and transport facilitation to help develop value chains and facilitate the efficient reallocation of factors of production. More fiscal space needs to be created through domestic revenue mobilisation, investments in health, education and infrastructure.
In your dealings with potential American investors, what do they point to as their greatest source of concern regarding investing in Nigeria, and why is the country not witnessing an influx of American investors in the power sector?
Nigeria’s trade regime is protectionist in key areas. High tariffs, restricted forex availability for 44 categories of imports and prohibition on many other import items have the aim of spurring domestic agricultural and manufacturing sector growth. The economic downturn in 2020 put pressure on Nigeria’s foreign reserves. Domestic and foreign-owned businesses frequently cite the lack of access to foreign currency as a significant impediment to doing business.

The country’s under-developed power sector is a bottleneck to broad-based economic development and has forced most businesses to generate a significant portion of their own electricity. The World Bank ranked Nigeria 169 out of 190 countries for ease of obtaining electricity for business. Reform of the nation’s power sector is on-going, but investors’ confidence is still weakened by tariff and regulatory uncertainty. Security remains a concern to investors in Nigeria due to violent crime, kidnappings for ransom, and terrorism in certain parts of the country.
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