Foreign exchange, tax and the COVID-19 pandemic are the major concerns of Chief Financial Officers of companies operating in Nigeria, according to a new report by KPMG.
The multinational consulting firm, in its ‘Nigeria 2021 CFO Outlook Survey’ report, said, “Foreign exchange takes the top spot, indicating the persistent issues around foreign exchange illiquidity and volatility induced by exogenous factors, which have daunted private sector growth.
“The naira has seen further depreciation in both the official and parallel market rates by 8.2 per cent and 6.8 per cent to N410 and N502 respectively, stoking further concerns around the outlook for foreign exchange rate. Moreso, foreign exchange illiquidity has continued to persist due to sustained pressure on foreign reserves (-4.3 per cent year-to-date to $33.8bn).”
The report said the increased oil prices and inflows from external borrowings should provide cushioning for the central bank to achieve its exchange rate harmonisation mandate, thus providing some respite for businesses.
It said, “Furthermore, we have newcomer COVID-19 as the third most important stay-awake issue, knocking off ‘profitability and cost management’ from the list. As the pandemic continues to evolve, there has never been a more pressing need for businesses to rethink and reconfigure their businesses for a changed world.
“CFOs have highlighted concerns around tax multiplicity, aggressive tax collection drive and lack of transparency in customs/excise administration as their top issues around tax policies in 2021. On tax matters, the new tax administration solution (TaxProMax) is expected to optimise the tax payment process by making it easier and faster.”
The report said the CFOs identified security, infrastructure and power to be the top three matters that the government needed to address to enable ease of doing business, spur economic growth and enhance public trust in 2021.
It said only infrastructure retained its position in the top three issues when compared with past survey results citing infrastructure, macroeconomic environment as well as tax and regulation as key matters.
KMPG said the run of events in 2020 such as the COVID-19 pandemic and the oil price crash exposed fundamental cracks in the country as they negatively impacted government revenues, induced recessionary conditions, slowed down consumption and trading activities and increased inflation.
It noted that the EndSARS protest was an offshoot of the youth’s increased frustration with the government’s inability to improve the socio-economic welfare of the average Nigerian.
The report said, “Restoring optimism over Nigeria’s economic prospects require increased efforts from both fiscal and monetary perspectives, this will restore growth to either the mid-to-high single digit levels observed in the era between 2000 and 2010, or double-digit expansion.
“However, the time to act is now. The 2020 Global Terrorism Index revealed that Nigeria ranked third for the fifth time since 2015. The country’s growing insecurity issues, ranging from banditry, terrorism, increased kidnapping, herder-farmer related violence, militant Biafran separatists, amongst others, had consequential effects as economic impact hit N50tn in March 2021.”
The CFOs expressed concerns over the “worsening state of power supply across the country,” but commended the efforts of the government towards the launch of private-public partnerships towards reducing the infrastructural deficit.
Concerning the African Continental Free Trade Agreement, KPMG reported that CFOs called for the creation of policies that would enable Nigerian businesses benefit from the agreement, which kicked off on January 1, 2021.