CPPE urges FG to suspend planned imposition of Excise Duties on Manufacturers

Manufacturers may be in for a difficult time as the Finance Minister, Zainab Ahmed, earlier this year announced that excise duty will be imposed on a range of manufactured goods in the country anytime soon.

Recall that manufacturers are already contending with escalating cost of production culminating from rise in energy costs, operating expenses, forex supply illiquidity, galloping inflation and avalanche of other structural bottlenecks.

Reacting to this development in the real sector of the economy, the Chief Executive Officer, Centre for the Promotion of Private Enterprise, (CPPE) Muda Yusuf stated that “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 stimuli, 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 litre 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.”

Yusuf added “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.”

He lamented that manufacturers are still struggling with unfair competition, particularly from products imported from Asia that are often much cheaper than goods produced locally which have flooded the Nigerian market due to the porosity of the borders.

He posited that the cost of logistics has continued to rise due to 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 as well as extortions in the logistics value chain.

The Chief Executive Officer, Centre for the Promotion of Private Enterprise hinted that the manufacturing sector offers good prospects for job creation and in line with the government aspirations now lifting more Nigerians out of poverty.

Yusuf contended however, that if the burden of tax becomes excessive and unbearable on this critical real sector of the economy the realisation of these outcomes by the government would be difficult.