CPPE: Foreign exchange, inflation & insecurity affecting Nigerian businesses

The business environment in Nigeria continues to face numerous challenges, with foreign exchange, inflation, and industrial concerns at the forefront of issues affecting investors in the real sector. The Centre for the Promotion of Private Enterprise (CPPE) recently released its October business environment report, highlighting these critical issues and urging the Nigerian government to address the concerns raised by investors. Muda Yusuf, CEO of the Centre, shed light on some of the key challenges faced by businesses in the country during a recent interview with CNBC Africa. Foreign exchange remains a major headache for investors, with issues surrounding currency depreciation, liquidity in the forex markets, and volatility causing significant concern. Despite reassurances from the Central Bank of Nigeria (CBN) that legitimate demands will be met, businesses continue to grapple with challenges in accessing foreign exchange. The depreciation of the Naira and instability in the forex market have made it difficult for businesses to plan and invest effectively. Energy costs have also soared, with diesel prices surging to over 300 Naira per liter. This increase in energy costs has put immense pressure on businesses that rely on generators for power and logistics. The rising cost of gas and diesel, coupled with the hike in oil prices, has led to increased operating expenses for businesses across various sectors. The need for alternative energy sources like solar power has been raised as a potential solution, but the underlying issue of import dependency for petroleum products must be addressed to achieve long-term sustainability. Furthermore, the imposition of transit duties by neighboring countries, such as Benin Republic, has added to the woes of Nigerian businesses engaged in cross-border trade. The punitive taxes imposed on trucks crossing the border have significantly increased the cost of doing business and hindered trade within the sub-region. This has led to logistical challenges, increased bureaucracy, and additional costs for companies involved in import and export activities. Industrialists are also concerned about the potential imposition of excise duties on carbonated drinks, as hinted by the Finance Minister during the budget presentation. This move could further burden the manufacturing sector, which is already grappling with various challenges, including foreign exchange constraints, high energy costs, weak purchasing power, and logistical issues. The impact of such additional taxes on the production and distribution of carbonated drinks could have ripple effects on the entire value chain, affecting small businesses and microenterprises involved in the sector. As the Nigerian government grapples with these pressing issues, stakeholders like the CPPE are calling for targeted interventions to address the root causes of these challenges. Improving local refining capacity, enhancing public infrastructure, and supporting innovative solutions in the energy sector are suggested as key steps to mitigate the effects of foreign exchange fluctuations and rising energy costs on businesses. With a focus on sustainable solutions and policy reforms, Nigerian businesses can navigate the complex economic landscape and drive growth amidst the prevailing challenges. In conclusion, the business environment in Nigeria is facing a myriad of challenges, with foreign exchange, inflation, and industrial concerns posing significant hurdles for investors and businesses. As stakeholders collaborate to address these issues and implement strategic interventions, the resilience and adaptability of Nigerian enterprises will be put to the test in overcoming the current economic obstacles and fostering long-term sustainability.