FG intervention loans will worsen businesses’ debts — Olawale
The Director-General, Nigeria Employers’ Consultative Association, Dr Timothy Olawale, speaks with IFE OGUNFUWA on the problems faced by the organised private sector and the government interventions required to mitigate the impact of coronavirus pandemic
What has been the impact of the coronavirus pandemic and the lockdown introduced to curb the spread of the virus on the organised private sector?
Nigerian businesses before the lockdown have had their fair share of tales of woes. Basically, these businesses were struggling to survive and there are a lot of reasons for that. The operating environment wasn’t too clement. On the issue of ease of doing business, we are still passing through a process that needs to be fine-tuned. The issue of infrastructure deficit, insecurity and power is there. All these things have a debilitating effect on businesses.
On top of these, we have the coronavirus pandemic, whose impact has been very devastating on businesses because businesses were totally shut down for about five to six weeks. There was no revenue accruing to businesses, and there were funds to be paid including statutory payments, wages and salaries for workers. Even with the easing of the lockdown, we still have serious challenges because those productive factories cannot run night shifts because of the curfew.
Secondly, the advantage that Nigeria enjoys on account of its population is still lost on businesses because they are still being run within each state because of the restriction in interstate travels. Even with essential goods that can be moved across state boundaries, we still have challenges with law enforcement agencies who have basically commercialised the movement of vehicles on the road. Even though the law permits the movement of these goods and services as essential goods, you still have to pay through your nose for you to be allowed passage.
That is what we are experiencing. The effect on revenue and income has been very serious and because of that, we are not the only ones that will bear the brunt; workers, investors and the larger society are bearing the brunt. There is a ripple effect on the entire value chain of the economy.
NECA signed a Memorandum of Understanding with the labour unions recently. What prompted this decision?
We are in a very unusual situation where there are forces beyond our control as employers of labour, making us make unwilling decisions. For instance, we have had to make decisions with regard to shedding load, based on the capacity to be able to sustain our workforce. This has an attendant effect because whether it is pay cut or separation with employees or declaration of redundancy, there are windows provided by our labour laws.
One of the major reasons we signed that MoU was to ensure that we follow due process in these unusual times, in making and implementing decisions. In other words, we want it to be in the atmosphere of peace and transparency. We want a situation where we carry the representative body of employees along in our decisions, not because we are bound to report to them but in the spirit of transparency. We want to carry them along and for there to be fairness in what we do.
Where there is no transparency, there is always mutual confusion and it may result in anarchy and disharmony in the workplace and we want to eliminate this. Importantly, there are fundamental issues that have caused unnecessary disharmony in the world of work, which could be solved by social dialogue, and we want to entrench social dialogue as a fundamental part of the relationship between labour and employers. We signed the MoU and we got the International Labour Organisation to be the witness, and we know it is a positive development.
Is there anything the government can do stop the private sector from laying off workers?
There is a lot that the government can do, and we have even formulated a job retention scheme, which we have shared with the government. Some bordered on palliatives with regard to payment of salaries for a particular period of time. It may even be a fraction or some percentages like it is being done beyond the shores of Nigeria.
We have examples all over the world which we have also shared with the government. It may also be with regard to the support or discounted rate of infrastructural supply like in France where electricity being used by companies is subsidised by the government. There are lots of options, and we have spoken with the government and made proposals on all these options just to cushion the effect of COVID-19 on businesses. Rather, what the government is doing is a far cry from the expectations of businesses.Businesses, before COVID-19, were highly indebted to banks and have outstanding facilities they were servicing, and now they are being forced to take loans to survive pending when things get back to normal to pay salary and others. Instead of the government giving a bailout or grant, what we have from the Central Bank of Nigeria is loan, which will compound the indebtedness of businesses. What we have seen is that many businesses are not interested in this facility. We also realised that probably the government does not have the capacity on account of dwindled income or fall in the price of crude in the international market. But the government has not come to complain that it does not have the capacity.If the government prioritises the welfare of workers and ensure the sustenance of jobs and employment of the workforce, definitely, the government will find a way to support businesses. Where there is a will, there must certainly be a way.
Some people are suggesting tax waivers as a way to support companies. Do you think this is enough?
It is a combination of interventions. Tax waiver or deferral is also part of the intervention and palliatives we have proposed to the government but the government is not looking in this direction so far. Probably, one day the government can say it is considering them but the government has been mute on all these suggestions. What we are saying is that the government should lighten the burden of employers so that they can retain jobs and, if possible, employ more to solve the nagging problem of unemployment in our society.
Is there any interest to be paid by the beneficiaries of the loans being offered by the CBN?
The interest rate varies depending on the package you apply for. And that is what we have actually been saying that if at all the government through the CBN is offering loans to businesses, it should be at zero interest. What is more desirable is a grant or bailout. But if the government does not want to give a bailout and want businesses to pay back, it should be at zero interest rate. That is when we know the government is supporting businesses. In a situation where you ask them to take it at whatever rate, it is still a far cry from expectations.
Recently, Vice President Yemi Osinbajo said by the end of 2020, 39.4 million Nigerians will be unemployed. What is your take on this?
The vice president was re-echoing the prediction of NECA. NECA has predicted that about 45 per cent of Nigerians would have lost their jobs by December 2020, and he is putting his estimate conservatively at 40 per cent, which is a little below what NECA has predicted. This is a reality, based on the circumstances that businesses have found themselves. Because you cannot run businesses that are not profitable and continue to retain your overhead cost. We must find a way to shed load. Fortunately, one of the things that will be affected is manpower. That is why we are saying there should be a way out if the government can lend that stimulus support to businesses. Is it until the economy is badly hit before the government realises we are not crying wolf where there is no wolf?
What recovery strategy do you think individual businesses should employ?
What we can do is to cut our costs, and there are many ways to do this. It does not necessarily have to do with shedding of manpower. Businesses can cut their costs by reviewing their entire budgetary provision and projection for the year; that we have done. We have also advised businesses that where they have existing credit facility and you know you cannot pay back, that funding of it is not sustainable on account of the current situation, meet with your creditors and discuss with them. Reschedule if it is possible. And most businesses have done that even though with higher interest but they have extended the lifespan of those loans.
Unfortunately, there are new cost elements that are being introduced into businesses in the interest of safety. For instance, we are spending more on occupational safety and health, installing more infrastructure like automatic dispensers, scanners and hand-washing facilities as well as regular supply of sanitisers and nose masks. These are the inevitable investments we have to make. We are doing this to ensure that the workplace is safe for employees.
What can the government do to mitigate the impact of coronavirus on macroeconomic indicators like inflation rate and GDP?
The problem with Nigeria is the cost of governance. While we are lamenting the loss of revenue due to the plunge in the price of crude oil in the international market, we still retain those things that are ostentatious and bedevil our economy. For instance, with regard to the Oransanye panel report, which we have been asking the government to implement, the government has ignored that call. We thank God that the President finally approved the implementation. It remains to be seen how swift that will be and whether they will summon the political will to actually implement it.