2023 fiscal policy: Capable of producing negative effect on investments—MA

COMFORT EKELEME

The Manufacturers Association of Nigeria (MAN) has frowned at the newly released 2023 fiscal policy measures and tariff amendments, saying is capable of producing negative effect on investments with a huge consequence on job retention in these industries.

MAN also said that the release of the 2023 Fiscal Policy Measures, just over one month to its expected implementation date and the end of the current administration, sends negative signals to the business community locally and internationally with implications for existing and potential investors.

In a statement signed by its Director General, Segun Ajayi-Kadir MAN however, 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.

This was approved by Mr. President and implementation commenced on 1st June 2022,adding that the industry cannot afford any further increases at these extremely challenging times.

MAN said it has carefully studied the newly released Fiscal Policy Measures for 2023 by the Federal Ministry of Finance, Budget and National Planning, following the approval by President Muhammadu Buhari.

The Association maintained that the increases in excise tax for 2023 and 2024 as provisioned in the 2023 Fiscal policy, came as a surprise to the association because, saying that as a major stakeholder, MAN had actively participated in the deliberations on the proposal and presented various positions from its members across all sectors, especially those directly impacted by the proposed measures,

On the implication of the increase in excise duty for 2023, the Association noted that it would reduce production volumes with its attendant result on downward trend in capacity utilization.

Also, MAN maintained that there will be increased illicit trade in some of the affected products, erosion of members’ market share and revenue, especially following continued devaluation of the naira against major currencies,  inflation and increased security challenges faced around the country, freeze on employment and redundancies in the manufacturing industry and squeezed margins as our members are unable to pass additional costs to consumers by way of higher prices given their eroded income and dwindling purchasing power.

MAN said, “Apart from the above challenges faced in the business environment, manufacturers also have to contend with currency devaluation and increasing inflation resulting in higher cost of production as our members have little to no access to foreign exchange at the official window and have to resort to the parallel market at an extra cost of around N300 to $1.00

“All these are without regard to the industry’s contribution to the Nigerian economy in the way of significant taxes being paid (Excise, Corporate Income Tax, Value Added Tax – VAT, etc.); export revenue in foreign currency; employment of thousands of Nigerians by the industry directly and indirectly including supply chain partners in the SME sector as well as Corporate Social Responsibility (CSR) to the local communities and other stakeholders nationwide.

“We have earlier noted and forwarded our position on the Excise duty tax to the Government while it was being proposed in the 2023 Fiscal Policy Guidelines. We are again emphasising the fact that the proposed increase in the recently released 2023 guidelines i.e., on Beer, Wines and Spirits, Tobacco, has the potential to trigger unprecedented distortions in the affected industries as well as the entire manufacturing sector.

MAN further expressed worrisome that the current situation is indicative of inconsistency in government policy, given that industries that are affected by excise tax administration, already made 3-year strategic plans based on the agreed calendar as scheduled in the roadmap including domestic and export sales prices, revenue and volume projections, tax burden calculations, etc.

This, the Association said 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.

Meanwhile, MAN commend the federal government on some of the approvals as provided for under the Supplementary Protection Measures (SPM) on Annex I, II and III of the 2023 Fiscal Policy guidelines, which is in support of MAN agenda of Resource-based Industrialization.

“We however request that in addition to the issue of Excise tax increase, the following items should be reconsidered:

“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,” MAN said.