Manufacturers say tax burden threatening participation in AfCFTA

The Manufacturers Association of Nigeria (MAN) has decried the impact of multiple taxation on the operations of manufacturers across Nigeria, and its participation in the African Continental Free Trade Area (AfCFTA) agreement.

Segun Ajayi-Kadir, director general, MAN stated this in his paper presentation at the ongoing annual tax conference of the Chartered Institute of Taxation of Nigeria (CITN) in Abuja on Wednesday.

According to Ajayi-Kadir, the increased taxation for Internally Generated Revenue has led to heavier tax burdens than anticipated, impacting manufacturers’ profitability and competitiveness.

He explained that the taxes from federal, state, and local levels impacts manufacturing, exacerbating challenges and hindering development and competitiveness of the sector.

“The imposition of overlapping taxes which he said has created compliance burdens, operational inefficiencies, and reduced profitability for manufacturers. Duplication of taxes increases production costs and final prices of goods and services, eroding profit margins and hindering investment incentives.

“MAN survey conducted in 2023 reveals numerous taxes with overlapping effects, adding complexity and burden to businesses. Sales tax and Value Added Tax (VAT), mobile advertising charges, education levies, tenement rates, Land use charges, and parking fees contribute to financial burdens for manufacturers.

“Multiple taxation discourages investment, stifles entrepreneurship, and hampers economic growth, affecting SMIs disproportionately,” he said.

He noted that the Nigerian manufacturers’ competitiveness in the global trading environment has declined due to the multitude of taxes. “This tax burden may hinder the sector from maximizing potential gains in the African Continental Free
Trade Area (AfCFTA).

He however stressed that it is the hope of the Manufacturers Association of Nigeria that the government will ensure the filing of tax identification numbers (TIN) and tax returns in order to block leakages of multiple taxation and properly document their accounting records daily.

“It is our hope that the government carry out a comprehensive review of relevant statutory requirements, legal and policy frameworks in order to create an enabling business environment for businesses; engage the stakeholders in the amendment of outdated tax laws and appropriately harmonize taxes to eradicate the multiplicity of taxes.

“Check the excesses of non-state actors who impose a non-statutory tax burden on manufacturers; genuinely renew the social contract with the taxpayers and intensify mechanisms for accountability in order to encourage tax compliance and utilize tax revenue for the growth of the manufacturing sector and the economy,” he said.

In his remarks, Muda Yusuf, Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE) stated that the manufacturers in Nigeria were overburdened with high cost of operation.

For Yusuf, there is an urgent need for the government to ensure a more sustainable business environment for businesses, especially the manufacturers, who according to him were grappling with huge energy costs, huge logistics costs, supply chain challenges, forex volatility, and customs duty exchanges.

He said, “This is a major problem for manufacturers and indeed all investors. So investors are already dealing with the volatility in the foreign exchange market. We are hoping that with time these things will stabilize.

“This month alone we have changed the exchange rate for computation of import duty by close to ten times. How do you plan for the importation of raw materials? How do you plan the importation of your equipment and so many others?

“We are not saying that the government should allocate foreign exchange at different rates to different people, no. what we are saying is that to ensure the stability of trade, international trade, investors confidence. Please, let’s do something about this custom duty exchange rate so that we can have predictability and we can also even reduce costs.

Speaking further, Yusuf stressed the need for gover to promote policies that can develop the economy, instead of chasing revenue, stating that if the economy grows revenue will grow also.

He decried that most manufacturers have had the need to provide the road to their factory, provide security, water, electricity and other amenities that are supposed to be provided by the state governments.

“The government is worried about inflation, they are worried about unemployment, we need to reduce costs and one of the easiest ways to deal with this to see what you can do around trade.

“I’m saying this to underscore the point that the manufacturing sector needs some empathy in this economy. And that is why many investors are now migrating to the services sector. The economy now is about 57% services, because if you are in the service. Sector, you don’t need the 100 PVA generator, you don’t need clearing containers from the ports,” he said.

In his remarks, Matthew Gbojubola, the coordinating director, Federal Inland Revenue Service (FIRS) said that the Agency has begun the move to simplify the laws to ensure easy compliance.

According to him, the Tax Reforms Committee was deliberately established to rewrite and simplify the laws adding that efforts were ongoing to produce a new law for the entire tax system.

“The government wants businesses to grow but it needs the tax revenues to create a better operating environment,” he said.