Nigerians could suffer an increased rate of job loss which will cause a spike in unemployment if the federal government decides to implement the N10 excise duty tax during a period such as this according to Muda Yusuf, CEO, Centre for the Promotion of Private Enterprise (CPPE).
Yusuf said this in a statement made available to BusinessDay where he said the manufacturing sector offers good prospects for job creation and lifting more Nigerians out of poverty in line with the government aspirations however the sector is currently struggling with a lot of issues detrimental to its prospects and growth.
Earlier in January, the FG through Zainab Ahmed, Minister of Finance directed that an excise duty of N10 per litre be imposed on all non-alcoholic, carbonated and sweetened beverages. This was to discourage excessive consumption of sugar in beverages and raise revenues for health-related and other critical expenditures.
Yusuf said that if the federal government maintains its decision to impose the N10 per litre excise duty during this period, it will cause more harm than good and the government will not achieve the desired results.
“These are very difficult times for manufacturers as they contend with the escalating cost of production arising from elevated energy costs, rising operating expenses, sharp currency depreciation, forex market illiquidity, galloping inflation and numerous structural bottlenecks,” he said.
Furthermore, as these challenges stifle local production and demand for goods, manufacturers have to contend with unfair competition, especially from products imported from Asia which have flooded the Nigerian market, largely because of the porosity of the borders. These imports are often much cheaper than goods produced locally.
“Despite these issues, a huge proportion of these costs cannot be passed on to the consumers because of weak purchasing power and high consumer resistance,” he said.
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Consequently, as these firms try to keep up with their financial obligations to the government and also maintain production activities, they will need to cut costs which most times result in downsizing workers . Small scale suppliers may be affected as these firms source materials in whole quantities from more integrated sources.
According to the Manufacturers Association of Nigeria (MAN), as of the first half of 2019, an estimated 1,644,392 historical cumulative jobs had over time been created by the sector.
Yusuf said that millions of micro-enterprises in the soft drinks’ fruit juice distribution chain will be adversely impacted by the imposition of the excise tax as well adding that manufacturers, across all product segments, need a respite, especially in the light of the unprecedented escalation of production and operating costs.
The Company Income Tax by sectors report in the first quarter of 2021 compiled by the National Bureau of Statistics (NBS) shows that Breweries, Bottling, and Beverages generated the highest amount of CIT with N23.26 billion.
In addition to this, brewers have managed to keep Pay-As-You-Earn (PAYE) tax in a relatively constant position because the industry is doing its possible best to keep employees.
“Given the strategic importance of manufacturing to the Nigerian economy, what the sector needs at this time is more stimulus and not more taxes,” he said.
Alfred Olajide, managing director at Coca-Cola Nigeria, said at a virtual fiscal policy dialogue held recently that the excise tax being a production tax makes it worse for them as it is not based on what is sold but what is produced which is a lot of burden at this critical time when industries need to be protected and pampered to bounce back.
“Already, the food and beverage sector contributed over N200 billion value-added tax, almost N400 billion in corporate income taxes in the last five years, and more than N100 billion in import duty in the last three years, yet we continue to grapple with the exponential increase in costs and limited ability to pass it to the consumers, who are also under pressure,” he said.
Doyin Salami, chairman of the Presidential Economic Advisory Council (PEAC) projected that Nigeria’s unemployment rate could hit 40 percent from its 33.3 percent due to the low capacity of the manufacturing sector.
