The Manufacturers Association of Nigeria (MAN) has again expressed its strong opposition to the proposed reintroduction of the 4% Free-on-Board (FOB) levy by the Nigeria Customs Service (NCS) in view of the damage the implementation will cause to country’s already fragile manufacturing sector.
The industrialists, in a statement issued on Monday, described the planned levy as retrogressive and ill-timed, pointing out the implementation of the fiscal policy will worsen the burdens on manufacturers, particularly at a time when businesses are contending with surging production costs, volatile foreign exchange (FX) rate, and inclement economic environment.
The Director-General of MAN, Segun Ajayi-Kadir, in the statement maintained that the manufacturing sector had been grappling with several challenges threatening its survival over the past years.
He pointed out that the sudden reintroduction of the FOB levy, without proper consultation with key industry stakeholders, demonstrated a disregard for the struggles of local manufacturers central to the country’s industrial and economic development.
While expressing the association’s disappointment on the planned fiscal measure by the government without seeking input from manufacturers even after giving assurance that it will consult with the operators, Ajayi-Kadir stressed that inclusive dialogue could have guided the Customs Service toward more sustainable revenue generation options that do not stifle local industry or discourage investments.
The industry expert explained that adding the 4% FOB levy on imports to the already existing 1% Comprehensive Import Supervision Scheme (CISS) fee would only escalate the cost of importing essential raw materials and machinery, most of which are not locally available with the attendant negatively implications for rising production costs, reduced output, and higher consumer prices.
The Director-General stated that the current micro and macroeconomic data already reflected the worsening business climate, as the cost of imports had surged by over 118%, from N2.07 trillion in the first nine months of 2023 to N4.53 trillion during the corresponding period in 2024, driven largely by unfavourable foreign exchange (FX) rates.
This is even as he cautioned the fiscal authorities that imposing another levy would compound the current pressures on manufacturers by destabilizing theit supply chains, potentially leading to raw material shortages, increased demurrage costs, and mounting volumes of unsold inventory across the sector.
Ajayi-Kadir maintained the planned 4% FOB levy contradicted the government’s ongoing tax reform initiatives and fiscal policy restructuring, designed to reduce the multiplicity of taxes and ease the cost of doing business in Nigeria.
On what the association considered as a more reasonable option of generating revenue for the government, he advised that rather than introducing additional levies, the government should be prioritising measures that promote trade facilitation and support productivity.
While also describing the timing of the proposed levy as insensitive, particularly coming at a period when Nigeria’s inflation had surged to a nearly three-decade high of 34.8% until it was rebased in January this year. Ajayi-Kadir warned that passing on additional costs to consumers would only erode their already weakened purchasing power and worsen the standard of living of millions of ordinary Nigerians
According to the Director-General, apart from the immediate financial strain on manufacturers, the association believes the proposed levy could encourage manufactured goods smuggling, trade diversion, and under-declaration of imports, thereby undermining the Customs Service’s revenue collection objectives.
The MAN chief further pointed out that implementation of the proposed levy could also derail Nigeria’s non-oil export drive, as many local exporters largely depend on imported inputs to manufacture goods for international markets.
Ajayi-Kadir warned that unless the fiscal authorities take urgent steps to stop the proposed reintroduction of the 4% FOB levy, Nigeria risked accelerating its path toward de-industrialisation, noting that industry leaders’ sentiment is already shifting, with MAN’s quarterly CEO Confidence Index reflecting a decline in optimism about the sector’s future.
He charged the Federal Government to decisively intervene by ordering the Customs Service to suspend any plans to reintroduce the 4% FOB levy as the nation’s long-term economic stability depended on the ability of its manufacturing sector to remain competitive, resilient, and adequately supported with fiscal and other incentives.
