The Manufacturers Association of Nigeria, MAN, has brought to the notice of the Federal Government, the negative impact its new Excise policy would have on the economy.
While reviewing the newly released 2023 Fiscal Policy Measures and Tariff Amendments, Segun Ajayi-Kadir, Director General, DG, of MAN, warned that the real impact on its members in the industries under excise regime from the 2022 fiscal policy would be dire.
The DG, first noted that it would result to reduced production volumes with its attendant result on downward trend in capacity utilization while illicit trade in some of the affected products will grow and also it will erode members’ market share and revenue, especially following continued devaluation of the Naira against major currencies.
According to Ajayi-Kadir, it will lead to inflation and increased security challenges faced around the country, while also bring about freeze on employment and redundancies in the manufacturing industry in addition to 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.
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 US$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.
The DG, further added that the Manufacturers after 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, expressed the shock that the increases in Excise tax for 2023 and 2024 as provisioned in the said 2023 Fiscal policy, came as a surprise to them because, 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.
What surprised the Association more is that from the meeting held with the Minister of Finance, Budget and National Planning on the 29th March, 2023, MAN representatives were informed that the 2023 proposals on additional Excise tax increases were being stepped down until further consultations on the 2023 Finance Bill.
Additionally, Nigeria Customs Service was notified by the Federal Ministry of Finance vide Memo Ref. No. F. 17417/351 of 15th February 2023 that the existing Fiscal Policy Measures for 2022 as they relate to Alcoholic Beverages and Tobacco Products will take effect from 1st June 2023 and 1st June 2024 as approved in the 2022 Fiscal Policy Measures roadmap for 2022 to 2024.
Based on the above, MAN members had finalized their annual strategies and projections while exporting members had concluded pricing negotiations for orders to the end of fiscal period, on the strength of the agreed excise roadmap and recent assurance from the fiscal authority.
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, added the DG.
He said that it is 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 in our opinion, 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.
“It is therefore alarming and concerning that the implementation of the 2022 to 2024 approved excise roadmap, as contained in the 2022 Fiscal Policy (which commenced on 1st June 2022) has unfortunately not even been implemented for up to one year, before Government decides to ‘shift the goal post’. This was done without any consultation on or assessment of the impact of the huge increases, which in some cases are up to 50% on ad valorem and 75% on specific duty rates, over and above the already approved high increases of up to 50% and 45% respectively.
“Ironically, based on data from our members, Government is unlikely to earn more revenue from further excise increases due to significant decline in sales by companies in the sector, yet the new policy is likely to fuel illicit trade, industry recession, capacity underutilization, layoffs, etc. The unilateral action by the Government despite the complaint and persuasion by stakeholders for the fiscal authority to consider the consequence on the industries, businesses and the economy as a whole is quite unfortunate.” he added.