By Chinyere Anyanwu
The Manufacturers Association of Nigeria (MAN) has raised concerns about the provisions of the 2023 Fiscal Policy Measures (FPM), including the record increase in excise duty on beverages and tobacco and the introduction of a tax on Single Use Plastics (SUPs), among others, and called on the Federal Government to suspend same. The call was made at a press conference held by the body in Lagos yesterday.
The association, through its Director General, Segun Ajayi-Kadir, passionately appealed to the Federal Government to, “suspend the 2023 FPM and retain the 2022-2024 excise duties roadmap as approved in the 2022 FPM, to foster stability in the affected sectors and their value chain, in the interest of the national economy.”
The MAN DG also called on the Federal Government to “reverse the tax on Single Use Plastics (SUPs) and engage with relevant stakeholders to facilitate ongoing initiatives, which have a better prospect of achieving the desired environmental objectives,” adding that government should, “consider alternative measures to achieve revenue and other objectives of the government in a sustainable manner.”
Speaking further on the association’s concerns on the implications of the proposed increase of excise duties on the manufacturing sector, consumers and the economy as a whole, Ajayi-Kadir explained that MAN reached out to government when it got hint of the increase and was assured that no such thing was going to take place.
He added that at a meeting on March 29, 2023, “the Minister of Finance, Budget and National Planning assured representatives of MAN that there would be no increase beyond the pre-scheduled increase for 2023 as provided in the excise duties roadmap in the 2022 FPM.
Consequently, the exponential increase in excise in the 2023 FPM came as a shock to the industry and is, in effect, ‘an increase on an increase’, since there was already an approved increase in place for 2023.”
The MAN DG, in addition, said the manufacturing sector is in acute recession owing to, “extraordinary challenges, namely: sustained scarcity of naira (which has led to a crash in consumer purchases); limited access to foreign exchange (which has led industry to purchase foreign exchange from the parallel market, thereby increasing costs); high inflation (further driving up cost of operation and prices of products) and a struggling economy,” noting that this was not the time to impose additional increases in excise.
According to him, “significantly diminished sales volumes will lead to business restructuring and a reduction in investment across the impacted sectors. If sales proceeds can no longer sustain business overheads and operating expenses, businesses will be forced to scale down their operations, which would result in factory closures, job losses, a decline in exports and much more.”
He also drew attention to the expected impact of the increase on Foreign Direct Investment (FDI). He said, “data from the National Bureau of Statistics (NBS) showed that inflow of FDI into Nigeria fell by 33 per cent in 2022, while unemployment rate stands at 33.3 per cent and rising. These indices will worsen if the increase in the 2023 FPM is applied.”
In his analysis, he noted that government revenue itself will be adversely affected, saying “decline in sales and profitability of the industry will result in a decline in the industry’s total tax contribution to the government because Companies Income Tax (CIT), Value Added Tax (VAT) and education tax are directly tied to the performance and profitability of the companies. Further over-taxing regulated products will nudge consumers towards cheaper, illicit products which will lead to further loss in revenue to governments, in addition to endangering consumers.”
Ajayi-Kadir further highlighted the sectors’ value chain that will be severely impacted, including agriculture, logistics, bottling, labelling and packaging businesses, as well as distribution, wholesale and retail businesses, which cater for over 950,000 direct and indirect employees.
He explained that a crash in sale volumes and consequent cuts in production will severely impact these businesses in the value chain, which will have a multiplier effect on the national economy, saying transactions with suppliers in the sector declined by over N260 billion by the end of 2022, when compared to 2021.
He stated that, “reneging on the 2022 roadmap within a year of its execution, (and so significantly, in spite of the serious implications of this action), will send negative signals to current and prospective investors in Nigeria and thereby damage investor confidence.”