MAN raises alarm over 200% increase in price of AGO

COMFORT EKELEME

The Manufacturers Association of Nigeria (MAN) has raised alarm on the implications of the over 200per cent increase in the price of Automotive Gas Oil (AGO) on the Nigerian economy and the manufacturing sector.

MAN also urged the federal government to remove the Value Added Tax (VAT) on AGO (diesel) as an instant stimulus for an immediate reduction in price and expedites action in reactivating or privatizing the petroleum products refineries in the country.

The association also wants the federal government to as a matter of urgency, address the challenge of the repeated collapse of the national grid (twice within a week), which is causing an acute electricity shortage in the country, especially for manufacturers.

MAN in a statement on its position on the recent increase in the price of AGO signed by its Director-General, Segun Ajayi-Kadir, said more worrisome is the deafening silence from the public sector as regards the plight of manufacturers.

According to MAN,  four obvious questions that readily come to mind that are seriously begging for answers are: What can we do as a nation to strengthen our economic absorbers from external shocks? Should manufacturing companies that are already battered with multiple taxes, poor access to foreign exchange, and now over 200per cent increase in the price of diesel be advised to shut down operations? Should we fold our arms and allow the economy to slip into the valley of recession again? Is the nation well equipped to manage the resulting explosive inflation and unemployment rates?

“In the short term, the disruption occasioned by the invasion of Ukraine by Russia will continue to heavily ruffle the global energy space and upset the supply of petroleum products thereby causing a persistent increase in the price of refined petroleum products including AGO.

“In the long run, it will result in an enormous increase in the prices of other manufacturing inputs like wheat, maize, fertilizers, and raw materials. By the time the current domestic reserve of manufacturing inputs is exhausted, in the face of an acute shortfall in supply, we are afraid that the prices of manufactured products will soar.

“Ironically, the Nigerian economy is completely dependent on the importation of refined petroleum products including diesel and other vital manufacturing raw materials and there are currently no sufficient alternatives.

“We are concerned about the implications of the sharp increase in the price of diesel on the manufacturing sector, which includes: The exertion of untold hardship on the manufacturing sector leading to the closure of many industries, leading to a reduction in capacity utilization, further decline in GDP, large scale unemployment across 76 sub-sectors and increase in the crime rate; Further decrease in foreign exchange earnings from the manufacturing sector as high cost of production feeds into export commodity prices;

“Sharp reduction in Government tax revenue occasioned by the drop in sales, lower profitability as the lesser quantum of disposable income will be available to purchase manufactured goods; Reverse-multiplier effect, as cost of production, escalates and the headways already made in the sector are grossly eroded; Negative spiral effects on every sector of the economy, resulting in hyperinflation, lower productivity, and turnover; Depressing trickle-down effects on productivity, unemployment, and standard of living of the citizenry; Uncontrollable incidences of insecurity with dangerous implications for the economic and social wellbeing of over 200 million Nigerians,” MAN said.

Further in its expectations, MAN said that as a matter of priority, there is a need for the federal government to continue to support manufacturing to accelerate the process of recovery from the aftermath of COVID-19 and previous bouts of recession to avert the complete shutdown of factories nationwide with a multiplier effect on the employment.

Also, MAN stressed the need for the government to issue licenses to manufacturing concerns and operators in the Aviation industry to import diesel and aviation fuel directly to avert the avoidable monumental paralysis of manufacturing activities arising from the total shut down of production operations and movement of persons for business activities

The association noted that the federal government should “urgently allow manufacturers and independent petroleum products marketing companies to also import AGO from the Republic of Niger and Chad by immediately opening up border posts in that axis in order to cushion the effect of the supply gap driven the high cost of AGO.

“Remove VAT on AGO as an instant stimulus for an immediate reduction in price and expedite action in reactivating or privatizing the petroleum products refineries in the country.

“Restrict the export of maize, cassava, wheat, food-related products and other manufacturing inputs available in the country; and grant concessional forex allocation at the official rate to manufacturers for the importation of productive inputs that are not locally available,” the statement reads.

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