The Manufacturers Association of Nigeria (MAN) says some provisions of the 2023 fiscal policy measures by the Federal Government are inimical to the growth of the manufacturing sector and the entire business community.
MAN Director General, Mr Segun Ajayi-Kadir, in a statement on Tuesday in Lagos, said the policy release timing sent negative signals to the business community with implications for existing and potential investors.
He explained that the increases in excise tax for 2023 and 2024 provisioned in the policy came as a surprise to MAN.
According to him, MAN had actively participated in its deliberations and presented its positions on the measures.
Ajayi-Kadir also noted that meetings with government informed the association that the 2023 proposals on additional excise tax increases were being stepped down until further consultations on the 2023 Finance Bill.
The MAN DG added that Nigeria Customs Service was notified by government that the existing fiscal policy measures for 2022 on alcoholic beverages and tobacco products takes effect from June 1, 2023 and June 1, 2024 respectively.
“Based on that, manufacturers had finalised their annual strategies and projections, while exporting members had concluded pricing negotiations for orders to the end of that fiscal period.
“It is worrisome that the current situation is indicative of inconsistency in government policy, given that industries that are affected by excise tax administration, already made three year strategic plans based on the agreed calendar.
“This, in our opinion, may create credibility issues for the country with existing and potential investors, impacting Foreign Direct Investments (FDI) and the country’s Ease of Doing Business index among other implications.
“It is therefore alarming that the implementation of the 2022 to 2024 approved excise roadmap, as contained in the 2022 Fiscal Policy (which commenced on June 1, 2022), has unfortunately not even been implemented for up to one year, before government decides to ‘shift the goal post’.
“This was done without any consultation on or assessment of the impact of the huge increases.
“In some cases, it is up to 50 per cent on ad valorem and 75 per cent on specific duty rates, over and above the already approved high increases of up to 50 per cent and 45 per cent respectively,” he said.
Ajayi-Kadir said that data from the association revealed that government was unlikely to earn more revenue from further excise increases due to significant decline in sales by companies in the sector.
He stressed that the new policy was likely to fuel illicit trade, industry recession, capacity underutilisation, layoffs, among others.
“We would like to put on record that the real impact on our members in the industries under excise regime from the 2022 fiscal policy has been negative.
“This has created reduced production volumes, increased illicit trade in some of the affected products, erosion of members’ market share and revenue.
“It also include inflation and increased security challenges faced around the country and a lot more.
“All these are without regard to the industry’s contribution to the Nigerian economy in the way of significant taxes being paid; taxes include excise, corporate income tax, Value Added Tax (VAT), export revenue in foreign currency and employment of thousands of Nigerians,” he said.
He, however, commended the Federal Government on some of the approvals, provided for under the Supplementary Protection Measures (SPM) on Annex I, II and III of the 2023 Fiscal Policy guidelines.
Ajayi-Kadir said the provision was in support of MAN agenda of resource-based industrialisation.
In addition to the issue of excise tax increase, he appealed that the green surcharge-import adjustment tax on motor vehicle and the single use of plastic surcharge of 10 per cent be reconsidered.
He said the surcharge of 10 per cent on single use plastic under HS Code 3919.10.00.00 and 3919.90.00.00 as well as Headings – 39.20; 39.21 and 39.23 (plastic containers, films and bags), appears ill-timed and hasty.
He noted that was necessary because government was currently working towards instituting a plastic cycle waste management policy with technical assistance from the United Nations Industrial Organisation (UNIDO) with support from the Japanese government.
“While we support and respect government’s opinion and measures aimed at addressing climate change and Nigeria’s commitment to net zero emission, it would have been better if we exercise some level of strategic caution and allow for a period of realistic transition to clean energy.
“This is considering the fact that most of our members engage logistics companies, majority of whom are in the Small and Medium-scale Enterprise (SMEs) cadre, who would need some time to migrate to green fuel and who lack the financial capacity to purchase electric vehicles.
“Anything short of this will increase the input cost of products culminating in un-competitiveness as well as eliminating many SMEs in the logistics downstream of the manufacturing sector.
“We, therefore, strongly recommend that government should maintain the status quo regarding the already government-approved excise duty increases on these items in the 3-year Roadmap as contained in the 2022 Fiscal Policy Measures.
“The industry cannot afford any further increases at these extremely challenging times,” he said.