The Centre for the Promotion of Private Enterprise (CPPE), one of Nigeria’s private sector advocacy groups, has appealed to the fiscal authorities to suspend the proposed excise duty on manufacturers in view of the fiscal and other challenges manufacturers are currently grappling with in the country.
The Centre’s Chief Executive Officer, Dr. Muda Yusuf, in a statement on Sunday recalled that early this year, the Finance Minister, Mrs. Zainab Ahmed, hinted that excise duty would be imposed on a range of manufactured goods in the country anytime soon.
Yusuf, however, noted that the fiscal option remained not desirable now since “these are very difficult times for manufacturers as they contend with escalating cost of production arising from elevated energy costs, rising operating expenses, sharp currency depreciation, forex market illiquidity, galloping inflation and numerous structural bottlenecks.”
The Centre’s CEO said: “They are also experiencing significant spikes in the cost of raw materials, cost of fund, high import duty, prohibitive cost of transportation and high cost of logistics. A huge proportion of these costs cannot be passed on to the consumers because of weak purchasing power and high consumer resistance. Given the strategic importance of manufacturing to the Nigerian economy, what the sector needs at this time is more stimulus, and not more taxes.
“The cost of diesel has risen by close to 200 percent in the past few weeks. It was at an average of N288 per lire in January this year and jumped to as high as N625 per litre in some locations. The cost of gas is similarly on the increase and there are also sharp increases in electricity tariffs.
“Several manufacturers are not able to import vital raw materials because of forex scarcity, a situation which is severely inhibiting their production and productivity. Many are forced to source forex from the parallel market at exorbitant rates. Manufacturers are yet to recover from the shocks of the pandemic and the subsequent recession. Manufacturing contribution to GDP is still less than ten percent. The growth recorded in the sector in the fourth quarter of 2021 was a mere 2.28%, after a contraction of 2.75% in 2020”, the economist added.
Similarly, Yusuf explained that Nigerian manufacturers were struggling with unfair competition, especially from products imported from Asia, which continued to flood the Nigerian market largely because of the porosity of the borders and they are often much cheaper than goods produced locally.
Noting that the cost of logistics has continued to be on the upward trend, driven largely by the state of the roads, the limited freight capacity of the railway system, the crisis at the major ports, the traffic gridlock around the Lagos ports and extortion in the logistics chain, the CPPE boss cautioned against further worsening the problems of manufacturers by imposing excise duty on locally produced goods.
Yusuf said: “The manufacturing sector offers good prospects for job creation and lifting more Nigerians out of poverty in line with the government aspirations. But if the burden of tax becomes excessive and unbearable on this critical sector the realisation of these outcomes by government would be difficult.”
