The Manufacturers Association of Nigeria (MAN) has denounced that the federal government has continued to breed a harsh business environment with its indiscriminate imposition of high and multiple taxes on manufacturers all in a bid to generate revenue.
The association lamented that the Nigerian government in a bid to stem the tide of the nation’s debt crisis is implementing anti-growth taxes in the manufacturing sector.
In its Manufacturers CEO Confidence Index (MCCI) report for the first quarter of 2023 (Q1’23) that was captioned, “Special Focus: MAN at the Receiving End of National Debt Crisis,” MAN noted that the manufacturing sector was always at the receiving end of revenue generation even though the money borrowed was not invested in areas that would have positive impact on the performance of the manufacturing sector.
MAN in its report revealed that the Aggregate Index Score (AIS) of the MCCI declined to 54.1 points in the first quarter of 2023 from 55.0 points it recorded in the fourth quarter of 2022.
The report recalled that Nigeria’s public debt burden which stands at ₦77 trillion is overwhelming for any new administration to inherit and put such administration in a fix in terms of achievement.
It added that “a whooping debt service-to-revenue ratio of over 100 per cent may spell doom for the new administration leaving it to continue the borrowing spree or incapacitated to provide critical infrastructure needed to boost the manufacturing sector and kick start the recovery of the economy.”
Stating that the rising domestic debt is crippling private investment in the manufacturing sector, the report noted that servicing external debts in foreign currencies is contributing significantly to high demand for foreign currencies which invariably has made importation of non-locally produced raw materials highly expensive for manufacturers.
“Higher debt servicing is consuming a greater volume of foreign exchange and worsening the foreign exchange scarcity that has plagued the manufacturing sector for many years.
“Huge public debt led to low foreign investment and foreign capital inflow which worsened the foreign exchange (FX) scarcity that has remained a bone in the throat of manufacturers. As public debt continues to grow unsustainably, it becomes increasingly difficult to cover salary payments and other recurrent expenditures in the civil service. The implication is more borrowing for government consumption on recurrent expenditure and less on infrastructure and other capital projects meant to boost manufacturing sector performance.”
The siphoning of collected cash such that it does not appear in the records, according to MAN, is Nigeria’s fundamental issue, not the generation or collection of revenue.
“Contrary to popular belief, exorbitant taxes are also collected in the informal sector of the economy without adequate remittance into state coffers,” the report added.
The report recommends that the new administration prioritise debt management and transparency to control risks and reduce the need for restructuring, which stands to benefit both debtors and creditors while diversifying the country’s revenue base by boosting critical sectors like manufacturing, agriculture, entertainment, tourism and ICT.
Also the recommendations section of the report details that the new administration implements “fiscal discipline by reducing the cost of governance and strictly complying with Section 41 of the Fiscal Responsibility Act and Section 38 (sub-section 2) of the CBN Act.
“Ensure the rehabilitation of local refineries and remove the humongous annual subsidy in phases while ensuring they are backed with appropriate palliatives for households and businesses.
Furthermore, the MAN recommended that the federal government “ensure proper management of capital and recurrent expenditure by determining the appropriate spending priorities that reflect the yearnings and aspirations of households and businesses within the limits of available resources.
“Promote transparency and productivity in government expenditure by ensuring public funds are expended on feasible development projects to minimise wastage.
The recommendations by MAN employed the government to widen the tax net through an enhanced data capture of business operators in the informal sector; strict implementation of the Voluntary Assets and Income Declaration Scheme (VAIDS) through the Federal Inland Revenue Service (FIRS) and further identification and amendments of the loopholes in the tax laws to reduce the leakage of tax revenues.
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More so, the report noted that the government needs to strengthen the fight against corruption and ensure proper implementation of the national budget.
“Set up a special court and reinvigorate the anti-graft agencies like the Economic and Financial Crime Commission (EFCC), and the Independent Corrupt Practices Commission (ICPC) to strengthen the fight against corruption.
“Establish incorruptible monitoring teams tasked to ensure effective budget implementation and detailed evaluation of budget performance.
Other recommendations include;
“Optimise the capability of the states to generate internal revenue given the abundant natural and human resources.
“Ensure the rehabilitation of local refineries and remove the humongous annual subsidy in phases while ensuring they are backed with appropriate palliatives for households and businesses.
“Ensure proactive judicial investigation into allegations of oil theft and stamp duty fraud.
“Embark on mechanisms that promote coordination and confidence among creditors to be granted opportunity for debt restructuring.”
