CEM REPORT, MANUFACTURING | The introduction of the Expatriate Employment Levy (EEL) in Nigeria has sent shockwaves through the nation’s manufacturing sector, with the Manufacturers Association of Nigeria (MAN) expressing strong opposition to the policy. The levy, which imposes a fee of $10,000 and $15,000 on companies employing expatriate staff and directors, respectively, has been met with concerns that it could further cripple the already struggling industry and deter future investments.
MAN Warns of “Punitive Levy” and “Albatross” to Economic Growth
In a statement titled “MAN Expresses Grave Concerns over the Expatriate Employment Levy,” the association’s Director-General, Segun Ajayi-Kadir, described the EEL as a “punitive levy” that is perceived as a “punishment” for both foreign investors and domestic companies seeking to employ skilled foreign nationals. He further warned that the levy could act as an “albatross” to the government’s aspirations for a private sector-led economy and damage the trust being built with domestic and foreign investors.
The statement said EEL “is potentially an albatross to the realisation of Mr. President’s private sector led economy aspirations and would certainly ruin the trust and confidence he is striving hard to build among domestic and foreign private investors”.
Ajayi-Kadir added, “The imposition of EEL poses potential impact on the manufacturing sector and the economy at large.
“This will in turn mark an unwarranted and unprecedented addition to the cost of doing business in Nigeria, especially to manufacturers.
“The policy will surely undermine the administration’s determination to position Nigeria as an attractive global investment destination and may engender a cold welcome in Mr. President’s future foreign investment promotions endeavours, as well as undermine Nigeria’s efforts at becoming a hub for shared services centre and business process outsourcing.”
Manufacturing Sector in Distress: New Expatriate Employment Levy (EEL) Raises Concerns
The statement outlines the numerous challenges already faced by the manufacturing sector, including the closure of 767 companies and the distress of an additional 335 in 2023 alone. Additionally, the sector grapples with low capacity utilization (56%), high-interest rates exceeding 30%, and foreign exchange scarcity hindering the import of raw materials. Against this backdrop, MAN argues that the EEL will only exacerbate existing difficulties, further increasing the cost of doing business and potentially discouraging multinational companies from establishing regional headquarters in Nigeria.
“The manufacturing sector is already beset with multidimensional challenges. In year 2023, 335 manufacturing companies became distressed and 767 shut down.
“The capacity utilisation in the sector has declined to 56 per cent; interest rate is effectively above 30 per cent; foreign exchange to import raw materials and production machine inventory of unsold finished products has increased to ₦350 billion and the real growth dropped to 2.4 per cent.
“Expatriates in Nigeria currently pay more than $2000 for CERPAC. The sector cannot afford another disincentive to increased investment and portfolio expansion.”
Related: Nigeria Imposes New Expatriate Levy
Concerns Regarding Knowledge Transfer, Legal Issues, and International Agreements
Beyond the immediate economic impact, MAN raises concerns about the long-term consequences of the EEL. The association fears the levy will hinder knowledge and skill transfer from expatriates to Nigerians, potentially slowing down the country’s technological advancement. Additionally, concerns exist regarding the legality of implementing such a levy through a handbook rather than a legislative process, potentially exposing the government to legal challenges. Finally, MAN expresses apprehension that the EEL may violate Nigeria’s obligations under international trade agreements like the African Continental Free Trade Area (AfCFTA), which promotes the free movement of skilled labor across the continent.
“For instance, Nigeria is a signatory to the African Continental Free Trade Area (AfCFTA) agreement. One of the pillars of the AfCFTA is the free movement of skilled labour across the continent, which is complemented by non-discriminatory measures against fellow Africans.
“Quite importantly, this could trigger retaliatory measures against Nigerians working across Africa and other nations of the world; frustrate regional integration efforts and portray Nigeria as a spoiler among her peers.”
MAN warned, “This levy may expose the federal government to a plethora of lawsuits that will distract government from the task of salvaging the current dire situation of our economy.
“Additionally, we already have laws that were promulgated to achieve the exact purpose for which the EEL was introduced. They include the Local Content Act, which guarantees the jobs of Nigerians, and the Immigration Act, which prescribes the primacy of consideration for Nigerians and imposes appropriate quota in the engagement of expatriate.
“Therefore, the EEL would amount to duplication and burdensome addition.”
MAN Calls for Discontinuation and Collaboration for Sustainable Solutions
In light of these concerns, MAN urges President Bola Ahmed Tinubu to reconsider the implementation of the EEL and calls for its discontinuation. The association emphasizes the importance of maintaining an investment-friendly environment and proposes alternative solutions focused on human capital development and incentivizing companies to invest in local talent. Furthermore, MAN advocates for increased stakeholder engagement and consultation before implementing policies with significant economic implications.
“A more effective and sustainable approach is for government to intentionally improve on its human capital development and incentivise companies to invest in developing local talent without compromising Nigeria’s ability to attract Foreign Direct Investment (FDI).
“MAN advises that it is extremely important that government institutionalise stakeholders’ consultations and engagement before important policies that could have far-reaching implications for our economy are made.
“This will allow for constructive input from the business community, who are able to support government initiatives and are the most impacted by the outcomes.”
Road Ahead
The controversy surrounding the EEL highlights the delicate balance between promoting domestic talent and attracting foreign expertise crucial for economic growth. As the debate unfolds, it remains to be seen how the Nigerian government will address the concerns raised by the manufacturing sector and navigate this complex issue.
