Experts outline key strategies to stabilise Nigeria’s manufacturing sector

Industry experts have said if government policies can be consistently implemented using technology and support from other sectors, Nigeria’s manufacturing sector will stabilise.

This was disclosed during the virtual Nigerian Economic Society Group (NESG) pre-summit event moderated by Muda Yusuf, thematic lead of the manufacturing thematic group themed ‘Reversing the Decline: Strategies for stabilising Nigeria’s manufacturing sector’.

“Hiring a skilled workforce via training or investing in science and technology that supports the technical aspect of production can improve this sector,” the experts disclosed.

It added that implementing import substitution strategies by sourcing raw materials locally to avoid foreign exchange exposures, lowering the cost of energy, and improving management policies like price reviews, stock, and inventory management can also make manufacturers get better.

Afolabi Olorode, acting MD of FBN Quest Merchant Bank said the banking sector can support the manufacturing sector through direct lending for working capital, term facilities and project science, value chain funding by raising equity and alternative sources of funding.

“FBN Quest Merchant bank provides underwriting for the intervention of funding from BOI, outsourcing foreign exchange through CBN intervention and process export transactions for manufacturers,” he added.

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Chijioke Uwaegbute, partner and tax leader at PwC Nigeria said the manufacturing sector is a sector that has been shaped by the combined effect of the removal of subsidy and devaluation of naira because most of its inputs are imported.

“In the previous year, the gross profit of manufacturers of the non-alcoholic drinks dropped by about 57 percent year-on-year, an increase in cost sales was about 78 percent and an increase in the cost of materials was 30 percent,” he said.

He added that local productions for import substitution and the new government policies like the reduced Value Added Tax (VAT) and manufacturers’ exemption of Withholding Tax are other strategies that can improve this sector.

Recently, the Federal Ministry of Finance issued a new Withholding Tax (WHT) regime, which is an advance and indirect source of taxation deducted at source from the invoices of the taxpayer, with exemptions for Nigeria’s farmers, manufacturers, small business owners, and others.

According to the Federal Inland Revenue Service (FIRS), Withholding Tax (WHT) is a method for collecting Income Tax in advance, deducted at rates ranging from 5 percent to 10 percent based on the transaction. Returns are due by the 21st of the following month. The penalty for late filing is N25,000 for the first month and N5,000 for each subsequent month of non-compliance.

Other exemptions include the Supply of Liquefied Petroleum Gas, Compressed Natural Gas, Premium Motor Spirits, Automotive Gas Oil, Low Pour Fuel Oil, Dual Purpose Kerosene, and JET-A1.