2025 budget: Nigeria plans spending on critical infrastructure projects

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00:00As Nigeria's parliament passes the $54.9 trillion budget for the 2025 fiscal year,

00:07the government says the additional spend will fund critical infrastructure projects.

00:12How much impact will this have in spurring economic activities for businesses in the

00:16country?

00:17Shegum Adjaye-Kadir, the Director General of the Manufacturers Association of Nigeria

00:22joins me for this discussion.

00:24Thank you, Shegum, for taking the time out to join us today.

00:27Thank you for having me.

00:28It's always a pleasure.

00:29All right.

00:30Now, upon hearing this news, the budget being expanded and the government focusing on spending

00:36big on infrastructure this year, what is going through your mind in terms of how this move

00:42could potentially support businesses?

00:45Okay, I think that the issue of expanding capital expenditure of government has always

00:53been what economic actors and those who run commentary on the economy have always spoken

01:01about, that there's need for us to strike a balance and to prioritize the spend, government

01:09spend on infrastructure so that we'll be able to overcome those challenges that have continued

01:15to limit the performance of the productive sector.

01:19Before now, we knew that we were almost striking unequal numbers between recurrent and capital

01:26expenditure.

01:27But when it was announced that there would be some uptick in terms of what government

01:35intends to spend during the year and that it was going to focus on infrastructure, it

01:40came as a relief for the manufacturing sector.

01:44Because if we really dissect the challenges that have bedevilled the sector, the debt

01:51and inadequacy of infrastructure has always ranked the highest.

01:56In terms of our manufacturer CO confidence index, the absence of optimism due to the

02:04perennial lack of adequate infrastructure support has been the most debilitating factor.

02:13So I think it's a welcome development that we are having an uptick in that, and that

02:18the spend will prioritize capital expenditure.

02:22What we just need to worry about should be that government should ensure that we actually

02:27have the spend and that we do not have a situation where funds have been allocated for specific

02:33infrastructure.

02:34And during the course of the year, there is impairment or there is lack of implementation

02:41or execution of the identified projects.

02:44Right.

02:45And let's talk about how the funds will be raised.

02:49As you know, the National Assembly can also increase the budget.

02:53This they have done.

02:55And just listening to one of the lawmakers, they did say that they've had conversations

02:59because the question did arise as to, okay, this is a 54.99 trillion.

03:04This is a significant increase from what it was previously.

03:07How is this or where is this money?

03:09And the additional funds, where will they come from?

03:12And the lawmakers have said that they've had, they've spoken to the Ministry of Finance,

03:15the Federal Inland Revenue Service, and the Nigeria Customs Service, and their assurance

03:19is that this money, additional sums can be raised.

03:23And now this takes me to, into the conversation, of course, news headlines earlier this week

03:30where, even from last week, where the customs, Nigeria Customs Service increased tariffs

03:36on imported goods by 4%.

03:40Just linking those two stories together, I wanted to get your thoughts on this because

03:44the federal government is confident, says it's optimistic, that it's revenue-generating

03:48agencies, particularly the FRS and the Nigeria Customs Service, can and will bring in additional

03:54revenues.

03:55So talk to us, because we did see negative reactions from Nasima, from the LCCI, I believe

04:01also Man, in terms of how this will impact the unintended consequences on businesses.

04:09Yes, okay.

04:10I think the starting point has always been, and by the way, Man actively participated

04:16in the runoff to the suspension of the 4% increase on FOB, but what we have always said

04:25is that it is always better to bake a bigger cake so that you'll be able to have a lot

04:32to share.

04:34Another thing we have said is that it's good for you to expand the tax base and not for

04:40you to increase existing taxes, levies, and fees that are collected by government.

04:47We identify very much so with increase in spend on infrastructure, as we have mentioned,

04:54but we have also said that we needed to be able to look at why we are not baking a bigger

05:00cake, or why is it difficult for the country to grow.

05:04There's a university in America that their annual budget is $69 billion.

05:12Nigeria's budget is just about $30 billion.

05:16And I think there is need for us to intentionally support governments to raise revenue, but

05:21the question has always been, how?

05:24How do you raise government revenue?

05:27Is it by increasing taxes or ensuring that you increase facilities?

05:32In the specific case you have mentioned, our ports are not attractive.

05:37The services of the Nigeria Customs Service needed to be improved upon so that we have

05:43more people using our ports to import their products and also to export.

05:49We shouldn't have trade diversions that make people to prefer to import from Togo and then

05:54truck their vehicles, or to engage in smuggling.

05:58So if we improve the infrastructure, we felt that it will still be possible for governments

06:03to meet its revenue aspiration without necessarily increasing the duty on imports.

06:11We should also know that in more recent times, we have had increase in the rate at which

06:17import duties are calculated.

06:19So it means that we have more inflow of Naira as meeting the target of customs.

06:25So we need that to ensure a situation where we incentivize trade-facilitating measures.

06:33We facilitate trade so that we have greater volumes and realize more revenue, rather than

06:38making the fewer than expected people to participate in trade activities pay much higher.

06:46So I believe that the two are not mutually exclusive.

06:49We hail government efforts by listening to stakeholders and suspending the implementation

06:54of the 4%.

06:55We do not think that is going to in any way jeopardize the aspiration of government to

07:03make more revenue, to earn more revenue.

07:06And on this suspension, the customs services said, look, they're suspending to further

07:12engage with stakeholders.

07:13I believe, probably, Man, you're going to be part of that conversation, too.

07:16But they've said that upon enlightening the stakeholders on why this 4% is necessary,

07:22there is a likelihood that they will go back and implement that 4%.

07:26They say they needed to buy new equipment and use new technology to make their services

07:32a lot more efficient, like you've talked about, a bit of a catch-22 situation here.

07:37But what are your thoughts if the customs service decides to go back to that 4%?

07:42Yes, we are hopeful that by the time we have the conversation, customs will not have to

07:47go back to implementing.

07:49As a matter of fact, we are hopeful that the conversation is going to help customs to look

07:54to other sources of making the revenue.

07:57And I believe a point in that direction will be to improve our efficiency, remove leakages,

08:03ensure that we allow our ports to be more efficiently used, the fact that we reduce

08:10smuggling, and the fact that we incentivize production so that we'll have greater volumes

08:17and many more people that are importing raw materials, spare parts, and machines that

08:23are needed locally.

08:26We are confident that an engagement will allow us to bring the expertise in the private sector

08:31to bear on government decisions.

08:34So I believe that at the end of the day, customs will not have to go back to increasing, because

08:40this is bad timing and is certainly going to impact on the prices at which domestic

08:47products are made.

08:49Already, the average Nigerian disposable income has dwindled.

08:53We shouldn't do anything that will find inflation and make life more miserable for the people.

08:58I thank you so much for talking to us today.

08:59We really appreciate your time on the show with us.

09:01Shegma Joye-Kadir, the Director General of the Manufacturers Association of Nigeria.

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