May 27, 2024
In 2021 economic outlook report, we posit that the annual real GDP growth rate would range between -2% and 1%
– By Godswill Odiong

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The Centre for the Promotion of Private Enterprise (CPPE) presents its economic and business environment review for 2022 and sets agenda for policy makers for 2023.

Macroeconomic Environment

The macroeconomic environment is a key driver of costs, profits, competitiveness, productivity and investment growth. This review focusses on four key macroeconomic variables: inflation, foreign exchange, and GDP growth.


As at January this year, headline inflation was 15.60% and rose to a peak of 21.47% in November 2022.  Meanwhile, food inflation consistently outpaced headline inflation and core inflation during the year. For the basket of goods and services consumed by the average Nigerian, costs have accelerated by between 50% to 100% in 2022.  The inflationary situation was the worst in recent history and the impact on citizens and the SMEs was very devastating. The world bank reported that 5 million Nigerians have been pushed into poverty in 2022 amid a slump of purchasing power by 35% driven largely by surging inflation.

In order to tackle inflation, we need to address the key drivers of inflation as follows:

i. Boost productivity in the economy to drive output growth.
ii. Stem the depreciation of the naira exchange rate.
iii. Address the illiquidity in the foreign exchange market.
iv. Minimise the monetisation of fiscal deficit. CBN financing of deficit should be strictly limited to statutory threshold spelt out in the CBN Act.
v. Government should seek creative ways of addressing insecurity in order to pave way for farmers to return to their farms.
vi. Tackle cost of logistics.
vii. Address the ease of cargo clearing as well as clearance of vessels at the port.
viii. Fix climate change concerns.
ix. Review trade policy to bring down the cost of intermediate products for manufacturers.


Nigeria’ GDP is valued at over N200 trillion [in nominal terms] as at third quarter of 2022. It grew by 3.11% in the first quarter; 3.54% in the second quarter; and decelerated to 2.25% in the third quarter. The world bank projected a growth rate of 3.11% for 2022 and 2.9% in 2023.

Given the enormity of the macroeconomic headwinds and the numerous fiscal and monetary policy shocks, the Nigerian economy could be adjudged to have demonstrated remarkable resilience in 2022.

The fragile growth performance was a reflection of the diverse headwinds bedevilling the Nigerian economy. These include: the macroeconomic instability, shrinking fiscal space, soaring public debt, heightening inflationary pressures, currency depreciation, foreign exchange illiquidity, surging energy cost, weakening purchasing power, legacy structural constraints, lingering insecurity, and crippling trade facilitation issues.  There were global headwinds triggered by the Russian -Ukraine war and lingering supply chain disruptions created by the covid pandemic.

The following sectors contracted in the third quarter of 2022:

Crude oil and gas which contracted by 22.67%
Oil refining contracted by 44.7%
Coal Mining contracted by 43.5%
Manufacturing Sector contracted by 1.91%
Food and beverage sector which is one of the most shocking contracted by 4.05%
Textiles contracted by 3.98%
Electricity and Gas – 3.56%
Plastics and Rubber Products – 3.92%

A striking element of the GDP Q3 report was the contraction of the manufacturing sector which shrunk by 1.91%. This is the first quarterly contraction of the manufacturing sector since 2020 when the economy slipped into recession. Even more disturbing was the slump in the food and beverage sector which contracted by 4.05%. This is the first contraction of the sub-sector since the recession of the second quarter of 2020.  This was a reflection of the several headwinds slowing the manufacturing sector over the past few years.


The forex challenge was a major predicament that investors grappled with in 2022.    The dimensions of this dilemma were as follows:

i. Sharp currency depreciation.
ii. Forex market illiquidity, especially at the official window.
iii. Volatility of the exchange rate, creating considerable uncertainty and unpredictability for investors.
iv. Transparency issues in the forex allocation ecosystem.

According to the world bank, official exchange rate depreciated by 5.2% in 2022, as at November; while parallel market rate depreciated by 40%.  Parallel market premium widened from 37% in January to 71% in November 2022.  The bank avowed that “Nigeria exchange rate policy settings are stifling business activities, investment and growth, and amplifying macroeconomic risks”


To unlock growth and investment in 2023, the government must undertake some urgent reforms.

The enactment of the Petroleum Industry Act[PIA] was a major step towards the reform of the oil gas sector.  It promises to transform the sector through the creation of a legal and regulatory framework that would inspire much higher levels of investors’ confidence.  But we need to see greater commitment to the implementation of the PIA. The deregulation of the petroleum downstream sector is a major economic reform imperative.  This is inevitable if we must unlock investment in the sector and put an end to the perennial fuel scarcity and the monopolistic structure of the sector.

There is a need to also consolidate the power sector reform.  An enabling environment must be created to sustain current private sector investment in the sector and attract new private capital to the electricity sector. Urgent reforms are vital with respect to electricity tariff, metering and deepening of energy mix.We need robust incentives [fiscal and monetary] to boost private investment in renewable energy.

We should reform the budget and appropriation processes to prioritise infrastructure financing and human capital development.  This would boost productivity and competitiveness of the economy.Adoption of these reform initiatives would guarantee progression towards fiscal consolidation, reduction in fiscal deficit, diminishing need for borrowing and abatingdebt service burden.


The current Cash Reserve Ratio [CRR] of 32.5% and Monetary Policy Rate [MPR] of 16.5% imposed on the Nigerian banks are among the highest globally. High CRR in particular has become a key impediment to financial intermediation by the banks. Even more disturbing is the fact that effective CRR is as high as 50% or more for some banks.

Financial intermediation is a fundamental function and essence of the banking system in an economy. The high CRR has made it difficult for the banks to play their primary role of financial intermediation.  Their profitability is also adversely impacted because of limited room for credit creation activities.  Ways and Means finances of the apex bank pose greater liquidity and inflationrisk to the economy than bank deposits. We seek a reduction in CRR so that the banks can be better placed to play their primary role of financial intermediation in the economy.


Current tax regime is stifling investment.  An economy that desires job creation, economic inclusion, investment growth and poverty reduction, should have an accommodating tax regime for investors.  

Corporate tax in Nigeria is 30%. But effective corporate tax is much more than that. There is tertiary education tax of 2.5% of profit; NITDA Levy of 1% of profit; NASENI Levy of 0.25% of profit; Police Trust Fund Levy of 0.005% of profit.  This brings effective corporate tax to about 34%.  This rate is one of the highest in the world. Average corporate tax rate for Africa is 27.6%; Asian average is 19.52%; European Union is 19.74% and global average is 23.37%.  Meanwhile new taxes are still being proposed by the National Assembly. These include Tertiary Health Tax of 1% of profit; and NYSC levy of 1% of profit. There are numerous other taxes imposed on businesses by the states and local governments.

This multitude of taxes is crippling investment in the Nigerian economy. There is need for an urgent review. The current tax regime is in conflict with the National Tax Policy which prescribes that there should be less emphasis on direct taxation in order to incentivise investment. Meanwhile, investors are grappling with numerous macroeconomic, structural and regulatory headwinds. They incur huge expenditure on stuffs which the government should normally provide – electricity, security, water, waste management, human capital etc.  These are implicit taxes, as it were.  There are also numerous state and local government taxes which businesses have to pay.


The maritime sector is a very crucial sector of the Nigerian economy.  It is a sector where reform imperatives have become very urgent. Legacy trade facilitation issues had persisted and becoming intractable.

There is a pressing need to ease the cargo clearing processes and vessel turnaround time at our ports. These are major components of ease of doing business to which government had severally expressed commitment. The following have become priority:

i. Shorter vessel turnaround time by reducing delays, curtailing bureaucracy and curbing extortions in the clearance of vessels. Vessel turnaround time should be reduced from the current four weeks to a maximum of one ten days.
ii. Shorter Cargo dwell time at the sea ports from the current 20 days to less than one week.
iii. Better engagement of stakeholders in the implementation of the Vehicle identification System by the Nigeria Customs Service.
iv. Fixing the problem of frequent breakdown of customs server which causes undue delays and demurrage payments by importers.
v. Reduction in the number of agencies and approvals needed for clearance of cargo at our ports.
vi. Deployment of technology at all stages of approvals and documentation.
vii. Acceleration of the implementation ofsingle window system in order to minimise human interface at the ports.
viii. Review of the current call up system with a view to making the system efficient and less vulnerable to corruption and extortion.
ix. Introduction of credible, independent and speedy Dispute Resolution System between the service providers, government agencies and importers.
x. Installation of scanners at off dock terminals and border posts across the country.
xi. Fixing the traffic constraints on the Lagos ports corridor to improve access to the ports.
xii. Need for prompt decision on the renewal of Port concession agreements.


The political environment has a major impact on economic and business performance. Therefore, the quality of the political transition process, especially the credibility of the 2023 elections would be of contextual significance for the economy in 2023.  The elections must be free, fair, transparent and credible. And it must be seen to be so.  This underlines the need for the independence, neutrality and credibility of the key institutions involved in the election management process – INEC, Judiciary and the Security agencies.  The quality of the democratic transition and choices would significantly impact economic outcomes in 2023.

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