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•Says policy’ll retard economic growth, FDI
By Merit Ibe [email protected]
The Organised Private Sector (OPS) has expressed worry over the recent introduction of the Expatriate Employment Levy (EEL) by the federal government, warning that the policy could be a major setback to the continental economic integration and ultimately stall the inflow of foreign investments.
The EEL was launched by the federal government on February 27. It is a mandatory financial contribution imposed on employers who hire expatriate workers in Nigeria.
The EEL, which is to be administered by the Nigeria Immigration Service (NIS), will be implemented from March 15, 2024.
Since the introduction of the EEL, it has been met with varying concerns by stakeholders, with respect to how it may impact corporates and sectors that require skills not readily resident.
The Manufacturers Association of Nigeria (MAN) faulted the levy, noting that it runs contrary to President Tinubu’s Renewed Hope Agenda and fiscal policy and tax reform initiatives.
The Director General of the association, Segun Ajayi-Kadir, viewed that the tax
is potentially a stumbling block to the realization of the administration’s private sector-led economy aspirations and would certainly ruin the trust and confidence among domestic and foreign private investors.
Ajayi-Kadir opined that the negative consequences of the policy on the manufacturing sector are humongous and cannot be accommodated at this time of evident economic downturn.
He argued that as major investors and employers in Nigeria, manufacturers believe that, while the levy is ostensibly primed to promote local employment, improve forex and non-oil income earnings, the levy will regrettably deter foreign direct investments, disincentivize domestic investors who have partnership with foreign investors and undermine knowledge transfers that are critical for Nigeria’s economic growth.
“This will in turn mark an unwarranted and unprecedented addition to the cost of doing business in Nigeria, especially to manufacturers, who are already beset with multidimensional challenges.”
He decried that in 2023, 335 manufacturing companies became distressed and 767 shut down.
“The capacity utilization in the sector has declined to 56%; interest rate is effectively above 30%; foreign exchange to import raw materials and production machine inventory of unsold finished products has increased to N350 billion and the real growth has dropped to 2.4%.”
The DG of MAN explained that expatriates in Nigeria currently pay more than $2000 for Combined Expatriate Residence Permit and Allien Card (CERPAC), saying the sector cannot afford another disincentive to increased investment and portfolio expansion.
He also pointed out that MAN is concerned that the EEL contradicts the international trade agreements and the obligations contained therein.
“For instance, Nigeria is a signatory to the African Continental Free Trade Area [AfCFTA] agreement. One of the pillars of the AfCFTA is the free movement of skilled labour across the continent, which is complemented by non-discriminatory measures against fellow Africans.”
He noted that the levy could trigger retaliatory measures against Nigerians working across Africa and other nations of the world; frustrate regional integration efforts and portray Nigeria as a spoiler among her peers.
“The policy will surely undermine the administration’s determination to position Nigeria as an attractive global investment destination and may engender a cold welcome in Mr. President’s future foreign investment promotions endeavors, as well as undermine our efforts at becoming a hub for shared services center and business process outsourcing.’
He therefore called for discontinuation of the policy, for the overall interest of “our national economy and is urgently needed to reassure the investing domestic and foreign investors of Nigeria’s commitment to an investment friendly environment and ease of doing business.”
Acknowledging government’s efforts to boost local employment and skills development through the EEL, the Lagos Chamber of Commerce and Industry (LCCI) opined that a careful balance must be struck so that this levy does not become an inhibition to attracting and retaining foreign investments crucial for economic growth.
Dr Chinyere Almona said the chamber was concerned about likely perception by foreign investors that the Nigerian government is not accommodative to foreign workers.
“This perception is harmful to our drive for FDIs.”
Almona noted that the with the drive for FDIs into Nigeria, “we need a conducive business environment to attract these kinds of investment into the country.”
The chamber however called on the government to consider exempting sectors that require unique skill sets for projects carried out in the country especially in construction and other sectors where we have critical shortage of supply of goods to meet rising demand.
“In sectors where the country lacks capacity to boost supply of critical products like food, cement, drugs and other agricultural inputs, we urge the government to charge concessionary or totally exempt the manufacturers in these fields to encourage them to come in and boost supply of such scarce products.”
She noted that imposition of this levy means that expatriates will be subjected to two administrative procedures to procure the CERPAC permit and now the EEL.
“ From experience, having two procedures will mean more human interfaces, more bureaucracy and more application costs. We recommend that the government continue to work with the already established and functional CERPAC with provision for yearly or regular reviews in rates according to internationally accepted rates. This way, we present our economy as open for business
Other recommendations of the chamber are that the Expatriate Employment Levy (EEL) may cause unintended consequences that may trigger the relocation of foreign companies to neighbouring countries that present a more conducive and less expensive environment for business.
“The imposition of this levy may likely spark retaliatory actions taken by other countries by imposing levies on foreigners and particularly targeting Nigerian workers. This will in turn affect diaspora remittances from Nigerian workers resident in other countries., among others.
For the Centre for the Promotion of Private Enterprise ( CPPE), the policy is coming at a time when the AfCFTA is gaining traction, noting that besides, many Nigerian citizens are in many African countries and may be victims of a reciprocal actions by other African countries.
Chief Executive Officer of the centre, Dr Muda Yusuf, applauded the policy, saying the time line for compliance of the policy is too short.
“The policy gave barely four weeks for companies to comply. For such a major policy shift, companies needed to be given minimum of six months. It is only fair and just to do so. This would be very disruptive for their businesses, plans and projections. “
Yusuf noted that some me of the companies affected are major investors that have investment of billions of dollars and have been in Nigeria for decades.
“This administration, being an investment friendly regime, should give companies more time.
“The country needs more direct investors than portfolio investors at this time. But ironically, both foreign direct investors and domestic direct investors would be more negatively impacted than portfolio investors.
“The economy needs more investors in the real economy – oil and gas, manufacturing, infrastructure, mining, ICT, Healthcare – all of which require varying skills and competencies. The truth is that major FDIs will typically need some critical staff to oversee their investments. It is imperative to give some considerations to this class of investors, given the scale of their investments which could be in billions of dollars.
“The challenge of influx of foreigners, especially the unskilled ones are more pronounced in some sectors than others. Vulnerable sectors include construction, distributive trade, hospitality and logistics. The policy should be targeted at these more vulnerable sectors. “
The CEO further noted that the policy has serious implications for diaspora Nigerians that may trigger reciprocal actions from other countries and this may affect Nigerians in diaspora.
“There are currently over 17 million Nigerians in various countries around the world doing extremely well in the fields of Education, Medicine, Health, Sports, Media & Entertainment, Leadership & Politics, Finance, Science & ICT, Transportation, Tourism, Industry and Agribusiness.
“This is a pool of very valuable external sector assets for us as country. We have the largest diaspora population in Africa. We also have the highest diaspora remittances on the continent, generally in excess of $20 billion. All of these could be at risk as a result of this policy.
“If the reciprocity policy is activated in any of their host countries, the effect on our diaspora citizens will be very devastating.
Nigeria occupies a leadership position in Africa and very well respected. Our president is the current chairman of ECOWAS. “
The centre appealed to government to review the policy and undertake broader consultation to fine tune the policy to ensure that genuine investors in the country are not hurt, adding that it is also important to worry about the implications of possible diplomatic reciprocity, especially for our diaspora community
