Addressing the Liquidity Paradox and Policy Reforms
The Nigerian Employers’ Consultative Association (NECA) has identified several critical policy reforms that are essential for rebuilding investor confidence, particularly in the manufacturing sector. One of the most urgent issues is what NECA refers to as the “liquidity paradox.” This phenomenon highlights the contradiction where financial institutions have ample cash but the real economy struggles with credit shortages. The recent Treasury Bill auction exemplifies this issue, with investors bidding N4.4tn for securities worth only N800bn, a 400 per cent oversubscription. Meanwhile, manufacturers and small and medium-sized enterprises (SMEs) face severe challenges.
To address this, NECA advocates for a mandatory lending quota requiring commercial banks to allocate at least 20 per cent of their loan portfolios to manufacturing, agriculture, and SMEs. Currently, banks earn about 40 per cent of their interest income from government securities rather than productive sector lending. Additionally, development finance institutions like the Bank of Industry must be recapitalised with strict performance metrics. Many of these institutions approve loans they never disburse, a practice that needs to end.
The government’s plan to borrow N24tn in 2026 intensifies competition for funds, crowding out private investment. Fiscal discipline is crucial to free up capital for productive use. While there have been notable improvements, such as gross foreign reserves reaching $50.45bn in February 2026, the highest level in 13 years, and inflation declining for 11 consecutive months to 15.06 per cent, these gains must translate into improved access to credit at single-digit interest rates for businesses.
Impact of Fiscal and Monetary Policies on Employers
The impact of recent fiscal and monetary policies on employers, especially in the manufacturing sector and among SMEs, has been mixed. On the positive side, the 50-basis point reduction in the Monetary Policy Rate to 26.5 per cent in February 2026 signals the Central Bank of Nigeria’s confidence that inflationary pressures are moderating. The stabilisation of the naira and the build-up of external reserves have created a more predictable operating environment compared to 2024 and early 2025.
However, the manufacturing sector faces a troubling story. The Purchasing Managers’ Index dropped from 112 to 105.8 points in January 2026, and the broader private sector contracted for the first time in a year. SMEs encounter devastating borrowing costs, up to five per cent monthly (80 per cent annually) from microfinance lenders because banks refuse to extend credit. Credit to the private sector fell by three per cent last year, even as government borrowing jumped by 26 per cent.
This crowding-out effect is particularly acute for manufacturers who require single-digit interest rates to remain viable. Many are now operating on the brink, with unsold inventories piling up due to weak consumer purchasing power. The recently enacted tax reforms, which NECA supports, must now be complemented by deliberate monetary policy that channels liquidity to the real economy rather than allowing it to circulate within the financial sector.
Tax Burden and Business Sustainability
NECA has been unequivocal about the new tax framework, effective 1 January 2026, which must be judged by its impact on business survival, growth, and job creation. The reforms address the central issue of multiple and overlapping tax burdens that have long stifled Nigerian businesses. The proliferation of levies and conflicting regulations across ministries, departments, and agencies continues to undermine productivity. The tax reform must eliminate duplication and harmonise incentives across government institutions.
The reforms must be implemented with sensitivity to the fragile state of small businesses. Over-taxation drives enterprises into the informal economy, ultimately reducing the tax base rather than expanding it. As stated at NECA’s end-of-year media engagement, the Nigerian spirit is not a substitute for good policy. Doggedness alone cannot keep businesses alive in a hostile operating environment. The government can balance revenue generation with business sustainability by adopting a compliance-as-a-service model for smaller firms, similar to what the CBN is now proposing for fintechs. This reduces the regulatory burden while enhancing visibility for tax authorities.
Structural Reforms in the Labour Market
Nigeria faces a structural paradox: our fastest-growing sectors employ only 1.5 per cent of the workforce, even as they contribute significantly to the gross domestic product. The Nigeria Economic Summit Group estimates that we must create 27 million jobs by 2030, roughly 4.5 million jobs annually, to meet demographic pressures. States control land, permits, local infrastructure, and skills pipelines, yet many governors spend more time commissioning projects than building production ecosystems.
Each state should identify its comparative advantage and develop value chains that employ people at scale. We must deliberately invest in sectors that create jobs at scale, such as manufacturing, construction, modern agriculture, logistics, and services. States should adopt short-term paid digital tasks for young people, digitising records, mapping communities, and collecting data for agriculture, which builds experience while injecting income into communities.
Tackling the Skills Gap
NECA is taking direct action through its Workforce Job and Employability Fair, scheduled for May under the theme “Empowering talents, building skills and driving inclusive growth.” This initiative is designed to equip job seekers with interview-ready skills and prepare them for meaningful engagement with employers. The skills gap is real and consequential. Employers consistently report they cannot find workers with the technical competence required, while graduates report there are no jobs; both can be true simultaneously.
Beyond the job fair, NECA is partnering with employers to articulate industry-specific competency frameworks that educational institutions can adopt; advocating for outsourcing hubs at the state level where young people can be trained in customer support, software testing, cloud operations, cybersecurity, data labelling, animation, and content production; and supporting the development of corporate bond markets and other long-term financing mechanisms that enable firms to invest in training without sacrificing short-term profitability.
Raising Wages Without Fueling Inflation
This is a delicate balancing act, but one that Nigerian employers are prepared to navigate responsibly. The key is to move from minimum wage debates to productivity-linked wage systems. The current reality is sobering. The N70,000 national minimum wage has been substantially eroded by inflation following fuel subsidy removal and naira devaluation. Workers are operating under extreme stress, with little room for savings, asset accumulation, or long-term security.
Employers can improve wages without triggering inflation or job losses by tying wage increases to productivity gains. When workers produce more value, higher wages can be sustained without raising unit costs. Investing in technology and process improvement, automation and efficiency gains, creates room for wage increases without price hikes. Adopting profit-sharing arrangements, linking compensation to business performance, aligns interests and reduces fixed labour cost burdens.
Strengthening Industrial Relations
Industrial harmony requires moving beyond confrontation to institutionalised social dialogue. The recent pledge by the Minister of Labour and Employment, Muhammad Dingyadi, to support NECA’s drive to strengthen industrial courts and arbitration panels is a welcome development. Strengthening alternative dispute resolution, as I stated at the fourth NECA International Labour Adjudication and Arbitration Forum in February, access to labour justice must serve all stakeholders, employers, workers, and government, not just worker-centric approaches.
Some labour disputes are taken to regular courts despite the existence of specialised industrial courts. This must stop. Stakeholders must embrace proper adjudication channels that were specifically designed for labour matters. The pre-election environment makes labour-government relations critical. 2026 could either foster a cooperative tripartite climate or degenerate into confrontation, depending on whether the government genuinely engages rather than dictates.
Modernising Labour Laws
Yes, Nigeria’s labour laws are outdated and do not adequately reflect the realities of the modern workplace, the gig economy, or the complexities of a rapidly digitising economy. The current stalemate in labour reform negotiations, with the government, labour unions, and advocacy groups unable to reach a consensus, is delaying much-needed modernisation.
The current framework assumes a traditional employer-employee relationship that no longer reflects the diversity of work arrangements in the digital age. We need clear provisions for remote work, gig work, and platform-based employment. While specialised industrial courts exist, the labour law should explicitly mandate alternative dispute resolution as the first recourse for workplace disputes before litigation, reducing costs and preserving relationships.
Minimising Compliance Bottlenecks
The Central Bank of Nigeria’s recent admission on regulatory friction provides a useful template for all regulatory agencies. In its report “Shaping the Future of Fintech in Nigeria,” the CBN acknowledged that 87.5 per cent of fintech operators say compliance costs significantly limit their ability to innovate, and over 60 per cent report that regulatory timelines materially delay product launches. The solutions are clear and replicable: creating a harmonised platform where businesses can complete multi-agency compliance requirements without navigating fragmented oversight.
Use technology to shorten approval cycles and improve oversight. Over one-third of fintechs reported that it takes over a year to bring new products to market due to licensing and approval bottlenecks. Adopt the compliance-as-a-service model to ease the regulatory burden on smaller firms. This reduces costs while enhancing visibility for supervisors. The perception that regulations are applied inconsistently across agencies must be addressed. Clear guidance and regular stakeholder engagement can resolve this.
Prioritising Infrastructure Development
Infrastructure deficits, particularly in power and transportation, remain among the most binding constraints on Nigerian businesses. The Senate’s recent call for the total removal of electricity subsidies is a critical step, as it would free up funds for development. However, removal must be accompanied by tangible improvements in supply. States should provide land, security, and permits for mini-grid operators. This decentralised approach can deliver power faster than waiting for national grid improvements.
The power sector has significant employment potential in metering, mini-grid deployment, maintenance, and solar installation. States should support local component production. The government should prioritise the completion of ongoing road and rail projects rather than initiating new ones. The current fuel price premium of approximately $55.5m per day (based on $102.83/bbl Brent vs $64.85/bbl benchmark) provides fiscal space for infrastructure investment. Building on the 90 CNG buses provided for labour, the government should accelerate the development of CNG refuelling stations and conversion centres to reduce transport costs.
