Nigerian companies caught in web of high forex over expatriates’ pay
Organisations in Nigeria which engage expatriates are presently caught in the deep drop of naira value against the dollar, as they face the strain of caughing up more naira per dollar to meet their monthly obligations.
Nigeria’s currency is exchanging for N220 to a dollar. This means that companies need more naira in value to pay expatriates for their services.
Experts say engaging expatriates is necessary to fill skills gaps in some sectors of the economy.
“The cost of engaging expatriates is part of the whole difficulty that the nation is facing. Another is the cost of doing business, which is in itself high in Nigeria.
“The hike in the dollar rate has made everything difficult”, said Adeola Tejumola, Chief Executive Officer, West, East and Central Africa – TNS RMS, a leading research company in Nigeria.
Tejumola, who believes that companies in various sectors bring in expatriates to bridge the skills gaps in certain sectors, further explained that Nigeria arrived at this peculiar situation “because of the decay in our educational system.
“We have to employ them because it is a calculated necessity. You must plan for it for the next number of years to up- skill the people. But in those number of years, it is difficult and expensive, coupled with other variables that are chocking the environment. It is now more expensive since the exchange rate has widened.
“In addition to insecurity, infrastructure challenges, erratic power supply, non-access to finance, multiple taxation, among others, tend to cramp the economy. Some manufacturers source up to 80 percent of their production materials abroad, which makes business expensive”, said Tejumola in an interview with BusinessDay.
Another analyst said some organs of the state also encumber businesses. These include registering businesses.
Nigeria is considered as a difficult place to do business, though it is also considered a high yield environment. The World Bank has placed Nigeria at 170 in 2015 from 174 last year, in the ease of doing business ratings.
The Lagos Chamber of Commerce and Industry (LCCI) also believes that the activities of regulatory agencies have the capacity to overburden companies whose growth is critical to job creation in the economy.
On how to unlock growth, Tejumola who does not believe in avoidable cost cutting, said “the solution is that Nigeria needs a flourishing economy and how do we get it? There must be total security and ease of doing business, availability of human capital and less corruption. If all these were to be in place, there will be FDIs, and once this happens, employment will happen and the economy grows.
“Everybody is saying that this part of the world is the last frontier for growth. It is not going to happen if certain things are just not in place. If electricity is suddenly fixed and infrastructure is fixed, you will be amazed at how things will leapfrog.
“ Why are we feeling the pinch of this dollar vs naira wide exchange rate? It is because of our reliance on oil.”
Tejumola said cost cutting limits the ability of companies to grow in the market, as companies need people and human resources to grow.
He recognised that the challenge in the country is a massive problem that cannot be solved in eight years but the present administration can set Nigeria on the right path. According to him, this can start from the smallest things like changing the attitude of the officials at the airport to total behavioural change.
Similarly, the Institute of Directors (IoD), Nigeria has always stood against high cost of doing business in Nigeria, saying it is the bane of economic growth and development in the country. The institute believes, according to a report, that access to and high cost of finance, lack of infrastructure and good operating environment, smuggling and substandard goods, lack of local patronage, dearth of industrial skills, are some of the factors affecting cost of doing business in the country.
Other analysts believe that resolution of electricity supply, security and multiple taxation, which are indices of ease of doing business, would positively impact on business.
“Once these challenges are resolved, the previous money spent on them would translate to investible funds and this would generate employment and spending power would also improve and companies could produce more”.
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