Sustaining Current Reforms Will Birth Positive Business Environment  

The Director General of Nigeria Employers’ Consultative Association (NECA), Mr. Adewale-Smatt Oyerinde, in this interview, canvassed the deepening of the current economic reform and the importance of approaching the ongoing negotiation of a new national minimum wage with creativity. Dike Onwuamaeze brings the excerpts:  

What is your view on the economic reforms of President Bola Tinubu’s administration and their implications for the economy? 

We are in a very interesting time because President Bola Ahmed Tinubu’s administration came in May 2023 and decided to take very definitive steps that successive administrations before it had avoided over time.  The removal of fuel subsidy was one of the key reforms that his administration decided to embark on. 

I remember that 14 years ago, NECA took the position that petrol subsidy should be removed. But successive governments could not do it. And we continued to carry the burden and dug ourselves in the hole until the Tinubu’s administration came and took the decision. 

Now, the reforms have brought some pain to the citizens. Are we prepared to mitigate the effects of these pains? The reality is that we are where we are now and all of us must find a way to mitigate these challenges. 

Also, the minimum wage negotiation is coming at the same time when disposable income is low. But the conversation has started at the committee level. 

Labour has requested N1 million (but later came down to about N700,000), which is valid within the context of labour’s reality. It is also desirable within the context of labour’s expectations. But we cannot situate it only within the context of labour’s reality and situation. We still have to take into the context of the ILO Convention 131. 

While we look at it within the context of the need of workers and their families, which labour has probably focused on, we should also look at it within the context of economic and business sustainability. 

We also have to look at it within the context of the economy comprising the interest rate, inflation rate, productivity, etc. All these contexts have to be brought into play before the committee will arrive at a minimum wage that we think will be acceptable to all.  

Do you not think that the implementation of the new minimum wage will lead to job losses?

The reality is this: unusual times require unusual responses. From our side, everybody in the ecosystem, both government and private sector, will have to be very creative in handling these issues. We cannot use the strategy of yesterday to resolve today’s problem. It will compound the issue. We should be asking what exactly our realities are. Were they foisted on us by the global economy or that we create them for ourselves? But the reality is that we are here now and everybody has to look at it dispassionately. 

When a business cannot sustain its wage bill it has to increase the cost of its products to be able to cover those expenses. As the prices of goods and services are increasing the income of consumers is not sufficient to buy them. At that point, the business will decide whether to continue on this path or if I do not want to. So, one of the options will be to retrench, which is a natural consequence. We have to put on our thinking cap as employers, labour unions, and government to address this critical issue. At any point where it becomes absolutely impossible for a business to remain sustainable that business has to make fundamental decisions: do I continue or do I close? I hope that we do not get to that extent.

How much progress has been made in the negotiation of the new minimum wage? 

The commitment of all parties showed that there will be some levels of collaboration and consensus building. The realities are there for all of us and we cannot run away from them. 

What figures are we expecting? 

It will be preposterous to tout any figure now. We are not in a position to share this information. 

What are you talking about with the government to enable the private sector to overcome this challenging time? 

We recently had a meeting with the Honourable Minister of Finance. Part of the issues that were presented was the issue of forex because the real sector is starved of forex. 

The government has said that there are the fifth columnists and saboteurs who are actually hoarding the dollar and making it scarce. 

While we acknowledge that there may be some saboteurs who do not want the economy to work, we also want to say categorically that it is the responsibility of the government to sniff them out and deal with them within the context of the law. The volatility in customs’ exchange rate for clearing of goods was part of the things that was raised with the Minister of Finance and it was good that the central bank has announced that the rate to use will be the exchange rate when the form “M” was raised. This is one of the things we have commended the government for its responsiveness. From our own end, we have taken time to continue to look at these issues dispassionately and create a nexus between the cause and effect. You cannot pick one issue in the economy and say that you have done significantly well on it because that issue has the potential to destroy or affect many other things. One issue is the ban on sachet alcohol. 

The NAFDAC has said that it is a health issue and decided to ban it. But you cannot look at the ban just from the perspective of health. There are some economic considerations that you have to bring in.  What happens to over N100 billion investments in that space? What happens to over 500,000 workers in that industry that will lose their jobs? So, you might have sorted out the issue of health from one end but have created multi-dimensional problems for the economy. How are we going to accommodate the 500,000 people who might have lost their jobs? How do we compensate for the investments that might have been lost? Moreover, you would have made the smuggling of those products in sachet packages attractive. We have many borders in this country that the customs cannot sufficiently manage. The regulated channel of tax that these businesses are paying cannot be collected from those smuggled products. So, it is a fatally wrong decision and that is why we have called it an economic sabotage, because you cannot take that decision without looking at its consequences for the whole of the economy. That is our perspective and how we think that government should look at all the issues that are currently bedeviling the organised private sector. The government has promised reforms and interventions but our view is that those interventions should be fast-tracked so that those it wants to save will not die before help gets to them.

What is your perspective about the business environment in the next five years? 

From the private sector’s perspective, we understand that current reforms are needed. If you find yourself in a hole the first thing you will do is to stop digging. And we think that this administration has decided to stop digging.  We believe strongly that we are on a trajectory of growth if these reforms are deepened and where necessary applied with a human face. The Port Harcourt and Dangote Refineries will come online this year. If we deal with our local refining capacity a large chunk of forex used for petrol importation will be saved. If the government also addressed the issue of oil theft frontally, you would have blocked that leakage. Also, dealing with the issue of fiscal responsibility by looking at the cost of governance will save funds for productive activities. If these reforms are followed thoroughly, everything being equal we will see a very positive business environment that will benefit all of us.  We think this economy will get back to the trajectory of growth not in five years but probably in three years. 

The National Bureau of Statistics recently changed its methodology for computing the unemployment rate. What is your view on this?

We cannot be selective on which parameter to choose and which parameter not to choose. The most important thing is to understand the context of that parameter. The new parameter of calculating does not contest that unemployment is high. The fact of the matter is that it just showed the new ways of calculating it. We are just aligning with the new global parameter that is being used currently to measure unemployment, which does not in any way contest the fact that unemployment is increasing. The first time the NBS released its data under the current methodology the unemployment rate was above 3.0 points. The recent report showed about 5.0 points, which affirmed that unemployment is actually increasing. It is left to the government to decide whether it should apply the new parameter or continue with the old method even when the world has moved on. It was a gathering of world statisticians, which NECA participated in, which came up with that model and affirmed it. It will be unfortunate to be part and come back to say that it is not right for us. For us, understanding the context of this new parameter is what is important. As I have said it does not contest that unemployment is increasing, it just showed us another way of calculating it. That is why we are saying that the NBS should continue to engage and enlighten Nigerians so that stakeholders and citizens will understand the new context of calculating the unemployment rate.

How do you react to the call that the government should open the borders for foods and other commodities to be imported into the country?

It is neither here nor there. As I have mentioned earlier that unusual situation requires an unusual response. One of the challenges we have with food security is the country’s national security challenges that have made most farmers not to go to their farms. Unfortunately, this has created agitation about food in a country that has one of the largest arable lands in the world.  First, address the issue of insecurity so that farmers can go back to their farms. But if it seems overwhelming to confront, the government has to find a way to provide food for the people. If in the short term importation is an option nobody is saying that you will not do so. The people have to eat. We have the African Continental Free Trade Area (AfCFTA) agreement that opens the market significantly. We cannot afford to perpetually lock up our borders because of AfCFTA and other sub-regional protocols we have signed. However, those interventions must be deliberate. They must be strategic and impactful.

How do you view labour union’s insistence on going on strike that disrupts economic activities?

Maybe it is time for labour unions to consider weekend peaceful protests rather than protests or rallies that would disrupt productive activities. The organised private sector will not support any event that will compromise the sustainability of businesses.