The Lagos Chamber of Commerce and Industry (LCCI) has asked the Federal Government to grant a one-year tax break to manufacturers, pharmaceutical firms, agro processors, airlines, small businesses and hospitality players to enable them navigate through Covid-19-induced economic crisis.
In a statement on the state of the Nigerian economy released on Tuesday to BusinessDay, Toki Mabogunje, president of the LCCI, says the global economy will likely become stiffer, with supply chains getting more complex and countries being more protectionist in the coming months. She projects that countries across the world may place technical embargo on exports of essential goods in a bid to meet local demand and as a way of managing disruption to global supply chain.
She urges Nigeria to react rightly by placing a temporary suspension on 50 percent increase in the Value Added Tax (VAT) rate till the end of 2020.
She further wants the government to suspend the Pay As You Earn (P.A.Y.E) for the next six months to boost the purchasing power and aggregate demand of Nigerians, thereby stimulating the economy.
The novel Covid-19 has dislocated all the markets across the world as countries are caught between saving their citizens’ lives and repairing economies undone by lockdowns.
The Nigerian economy had been in a bad shape before the pandemic, with over 80 million citizens living in extreme poverty and the country ranking as 6th most miserable country in the 2019 Hanke’s Annual Misery Index.
Mabogunje says the chamber has found that 83 percent of business owners plan to cut down salaries, downsize workforce or do a combination of both, which is worrisome.
She discloses that 54 percent of business owners want banks to reduce interest rate and give moratorium on loans, while 17 percent seek waivers on import duties and demurrages.
“Businesses therefore request adequate stimulus and intervention to preserve investments and save jobs,” she says.
She further recommends that agro-processing companies enjoy import waivers for the next one year in order to support food security and agricultural supplies.
“Commercial banks are implored to offer reprieve to businesses and corporates indebted to them,” she prescribes.
“The reprieve could be in form of loan moratorium and restructuring. We urge the CBN to review the cash reserve ratio downwards to 20 percent from the current 27.5 percent, to enable commercial banks have more liquidity to support businesses.”
For the aviation industry, Mabogunje recommends support towards augmenting insurance premiums which are dollar-denominated, as covers were mostly underwritten abroad due to lack of local capacity.
She also urges support to pay for operational cost, including international lease rental on grounded aircraft and maintenance (C& D-checks).
“There should be full implementation of the Executive Order on Removal of VAT from air transportation,” she further recommends.
She says the chamber is concerned that the current approaches used in implementing some of these measures targeted at cushioning the effects of the pandemic will not yield the desired result, stressing that there is a need to restrategise and ensure proper coordination both at the states and federal levels.
“We urge the government to focus on the completion of critical infrastructure projects nationwide such as the Lagos-Ibadan expressway, Lagos-Ibadan rail project, Enugu Airport, the Second Niger Bridge, East-West Road, among others,” she says.
“Also, there should be an upgrade of power and broadband infrastructure across the country in order to support ICT and digital economy.”
She explains that these public goods will have significant positive impact on commercial activities and businesses as they reduce cost of doing business and boost productivity.
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