On Thursday, February 16th 2023, the Nigeria-South Africa Chamber of Commerce held its February breakfast meeting themed “The 2023 Elections, Political Economy and Nigeria’s Business Environment Outlook”. The February edition of the breakfast meeting which was held virtually was sponsored by the professional services firm, PricewaterhouseCoopers (PwC).
PwC is a passionate community of solvers coming together in unexpected ways, to build trust in society and deliver sustained outcomes for all stakeholders.
On an introductory note, Osayaba Giwa- Osagie (SAN), Chairman, Nigeria South Africa Chamber of Commerce, emphasised that the Chamber’s engagements are focused on strengthening the bilateral trade relationship between Nigeria and South Africa. He reiterated their immense appreciation to PwC for the sponsorship of the February breakfast meeting.
In his lead presentation titled ‘2023 elections, political economy and Nigeria’s Business Environment Outlook’ Taiwo Oyedele, Fiscal Policy Partner & Africa Tax Leader PwC, began with an overview of the economic events of 2022, both on an international and national scale, highlighting the huge economic disruptions and big market failures experienced. He listed the “BIG 5” factors, that will shape the economy in 2023 viz Geopolitics, Economy, Social conflicts, De-globalisation and Technology and the challenges and opportunities they present.
He also discussed some ongoing economic issues including a huge budget deficit and the naira redesign crisis and also presented the main manifesto points of the three leading presidential candidates. Concluding with a quote from Abraham Lincoln “The best way to predict the future is to create it.
Implications, challenges and opportunities
- The big economic distortions – petrol subsidy, fx multiple windows, epileptic power supply
- Distrust & likelihood of social unrest
- Taxes and more taxes
- Fertile ground for conspiracy theories & impact on mental wellbeing
- Negative externalities and suboptimal policy choices
- Rising cost of living and doing business
- Low investment and capital formation
- Escalated risk of pre and post election violence
- Electronic payment solutions and benefits of digital adoption
- New business opportunities but don’t exploit others
- Right knowledge and commercial awareness will inspire innovation
- Regional / international opportunities
- Tax optimisation
- Elevate your position within organisation through strategic thinking
- Doing well by doing good e.g. supporting small businesses
” Mr Oyedele noted that regardless of who emerged in the presidential elections, Nigeria’s challenges would not go away in 2023 but it can safely be predicted that things would gradually improve. What was needed was for all to be mindful of likely challenges but still be open to opportunities while challenging the status quo with a solution mindset.
There was a panel session which in addition to Mr Oyedele featured Dr Andrew S. Nevin PhD, Partner and Chief Economist PwC Nigeria, as well as Olusegun Zacchaeus, Partner & West Africa Lead, Strategy&; Delia Asuzu, Associate Director and Regional Lead for Clients and Marketing Development PwC West and East Africa which offered a robust discussion on some of the key issues around Nigeria’s business environment outlook for the year.
According to Taiwo Oyedele Nigeria: facing significant economic headwinds, amplified by suboptimal policy choices!
- Slow economic growth: Low growth, fragile recovery (2.25% Q3 2022), also revenue and forex receipts
- Insecurity & climate change: Impact on investments, food insecurity & supply chain disruption, green commitments
- Rising inflation & unemployment: Inflation at 21.34% as at Dec 2022 (2x global average), unemployment at 33%+, high misery index
- Growing poverty: People living in monetary poverty (circa 95m), multidimensional poverty (133m)
- Persistent budget deficits: Low revenue, high expenditure, wasteful subsidies, govt inefficiencies.
- Rising public debt: Top 10 WB’s IDA list, rising debt service cost (over 100% of revenue), Ways & Means, domestic arrears
- Declining investments: low FPIs & FDIs, dwindling domestic capital formation
- Unrelenting wave of emigration: brain drain (Japa), and corporate migration / divestments
- Geopolitics and political economy: Local and international dimensions e.g. Russian invasion of Ukraine, OECD BEPS action plan.
- Regional factors: AfCFTA, ECOWAS treaty and protocols, impact on tax expenditure, competitiveness etc.
During the session, in response to a question on turning the tide on the budget deficit and rising public debt, Taiwo Oyedele responded: “We need to get to a point where we can do something transformational to our revenue, not just the incremental progress that we are celebrating. We need to get to a point where our tax to GDP ratio is in the region of 15% – 18% or even higher.”
Responding to a question around his assertion that Nigeria neither has a debt nor revenue problem, but a growth problem, Andrew Nevin said: “This narrative that we’re a low tax country is just simply incorrect, we are actually a high tax country, but the basic problem with this is, we don’t grow.”
On a question around the need for technology adoption and digital transformation, Olusegun Zacchaeus, stated: “The adoption of technology becomes a very important factor to create efficiency within the economic system… We think technology will be critical as we navigate these changes within a quality environment. I believe it is impacting all angles… Companies need to accelerate their digital transformation to ensure they can offer the right services to the users and sort of build trust.”
Based on the recently released PwC Annual CEO Survey, in which over 4000 CEOs from 103 countries, including Nigeria, were surveyed, some of the greatest short-term fears of these CEOs include inflation, economic volatility and geopolitical risks. Almost Forty per cent of these CEOs believe their organisation will no longer be economically viable in a decade if it continues on its current course.
Speaking to this data, Olusegun Zacchaeus said: “For me, this is a very interesting message because, beyond the short-term economic inflation challenges, you need to pay attention to megatrends and ask ‘will my business still be here in a decade?’’
Delia Asuzu, Associate Director and Regional Lead for Clients and Marketing Development PwC West and East Africa in a remark on the firm’s capabilities reiterated the importance of sustainability which is key to PwC’s global strategy, noting that: “PwC is known for delivering quality in assurance, tax and advisory services and ESG is one of the areas in which we are investing. So for clients, implementing a coherent strategy is perhaps one of the more visible ways of focusing on long-term value.”
“Our investments are in areas where our clients face the most significant challenges and opportunities”, she added before giving a vote of thanks on behalf of PwC.