• Wednesday, April 24, 2024
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MAN, LCCI caution FG on expatriate employment levy

MAN, LCCI caution FG on expatriate employment levy

…seen threatening investors

Lagos Chamber of Commerce and Industry (LCCI) and the Manufacturers Association of Nigeria (MAN) have called on the federal government to reconsider the expatriate employment levy (EEL).

According to a statement signed by Chinyere Almona, director general at LCCI, “The policy aims to address wage gaps between expatriates and the Nigerian Labour force while encouraging skills transfer and the employment of qualified Nigerians in foreign-owned companies.

LCCI recognises the need for a balanced approach to expatriate employment and its potential impact on Foreign Direct Investment (FDI) inflows.”

While MAN sees the imposition of EEL as posing a potential impact on the manufacturing sector and the economy at large.

Read also: LCCI calls for clear action plan for implementation of Oronsaye report

“This will in turn mark an unwarranted and unprecedented addition to the cost of doing business in Nigeria, especially to manufacturers,” Segun Ajayi-Kadir, director-general, Manufacturers Association of Nigeria (MAN) said.

The manufacturing sector is already beset with multidimensional challenges. In the year 2023, 335 manufacturing companies became distressed, and 767 shut down.

“The capacity utilisation in the sector has declined to 56 percent; interest rate is effectively above 30 percent; foreign exchange to import raw materials and production machine inventory of unsold finished products has increased to N350 billion and the real growth has dropped to 2.4 percent.”

“Expatriates in Nigeria currently pay more than $2000 for CERPAC. The sector cannot afford another disincentive to increased investment and portfolio expansion,” it said.

Besides, MAN is concerned that the EEL contradicts the international trade agreements and the obligations contained therein.

“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, the director general said.

“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 President’s future foreign investment promotions endeavors, as well as undermine our efforts at becoming a hub for shared services center and business process outsourcing,” the statement notes.

According to NBS, Nigerian nationals constitute only 59 percent of total jobs in Nigeria, their wages account for less than 45 percent of total wages, and the average basic salary of expatriates stands at more than 45 percent above the basic salary.

Consequent to the above, LCCI expresses its support of government policies that enhance the profile of the business environment, generate more revenue for the government, and create more opportunities for local employment, however, expresses its concern about the likely perception by foreign investors that the Nigerian government is not accommodative to foreign workers.

Read also: High-interest rate adds to manufacturers’ woes

Ajayi-Kadir, the director general of MAN posits that the rather punitive levy is already being perceived as a punishment imposed on investors for daring to invest in Nigeria and indigenous companies for employing needed foreign nationals.

It will deter multinational companies from either investing in Nigeria or setting up regional headquarters in the country. Also, the levy will make Nigeria a more expensive location for global expertise that international companies require for their operations.

Overall, we risk slowing down knowledge and skills transfer to Nigerians and undermining a key avenue for the country to move up the technology ladder,” he said.

Additionally, he said that Nigeria 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 expatriates.

Therefore, the EEL would amount to a duplication and a burdensome addition. This perception is harmful to our drive for Foreign Direct Investments (FDIs) inflows,” he noted.

Moreover, LCCI believes that with the drive for FDIs in Nigeria, there is a need for a conducive business environment to attract these kinds of investments into the country.

“Capital importation into Nigeria in the fourth quarter of 2023 stood at$ 1.088 billion out of which only 16.90 percent (or $184 million) came in as Foreign Direct Investments.

“We call on the government to consider exempting sectors that require unique skill sets for projects carried out in the country, especially in construction, and other sectors where we have a critical shortage of supply of goods to meet rising demand,” the statement read in part.

The chamber had expected that issues like a levy on foreign workers with tax implications would have been brought before the Presidential Committee on Fiscal Policy and Tax Reforms for inputs that align with their mandate of improving the business environment.

“There is also a need to align the provisions of this levy with existing frameworks like the Nigerian Content Development and Monitoring Board (NCDMB), existing incentives granted to pharmaceutical companies by the National Agency for Food and Drug Administration (NAFDAC), and the Nigerian Civil Aviation Authority (NCAA).

Read also: Manufacturers call for increased government support to restore ailing sector

The point must be made that maintaining expatriates in Nigeria is expensive, and as such our members only bring in expatriates for very critical roles that require highly technical skills that are not readily available locally.

“It is out of necessity that our members bring in expatriates and as such any imposition that makes this provision expensive will discourage them and jeopardise projects requiring such expatriates.”