Quality infrastructure, policies key to achieving econ diversification – LCCI

Lagos Chamber of Commerce and Industry has said that for Nigeria bid for economic diversification to succeed the government needed to embark on provision of quality infrastructure, policy and institution. In a statement signed by its Director General Mudal Yusuf the Chamber said “Three critical factors are crucial to drive economic diversification in the Nigerian economy. These are the quality of infrastructure, the quality of policies and the quality of institutions.  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.

“The policy factor has many dimensions – monetary policy, forex policy, interest rate policy, tax policy, trade policy, procurement policy and investment policy.  Each of these policies has a major role to play in the economic diversification process.  The policy mix must be right for the desired outcomes to be achieved. The monetary policy for instance should be designed to drive domestic investment through a moderation of the monetary tightening stance of the CBN.  This is needed to moderate interest rate in the economy.  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. The foreign exchange policy is another very important policy component which impacts on economic diversification.  A forex regime that perpetuates a rent economy would not serve the cause of diversification.  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.  

“The renewed aggressive tax drive is focused more on investors than consumers.  The burden of taxation is more on the investors in the economy than the consumers. The Federal Inland Revenue Service [FIRS] has scant regard for due process in its drive for revenue.   It is therefore inherently a disincentive to investment and economic diversification.  The three tiers of government targets investors more than consumers.  This is not in consonance with best practice principles in taxation.  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. 

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