Manufacturers pay most taxes but infrastructural neglect limits output
The manufacturing sector, despite paying the most taxes in Nigeria, and employing much of the country’s workforce, continues to suffer from infrastructural limitations that make it difficult to improve productivity.
In the first quarter of 2022, the National Bureau of Statistics’ report on Company Income Tax (CIT), shows that in terms of sectoral contributions, the top three largest shares in Q1 2022 were Manufacturing with 21.31 percent, Information and communication with 14.03 percent, and Financial and insurance with 12.20 percent.
A detailed breakdown of the top five contributing sectors shows that manufacturing as a sector contributed N44.56 billion in taxes, followed by Information and Communication with N29.34 billion, Financial and Insurance activities with N25.5 billion. Also, Mining and Quarrying chipped in N24.37 billion, while Public administration and defence, compulsory social security was N21.66 billion.
Even with a 1.17 percent decline from N45 billion paid in CIT from the previous quarter, manufacturing remained the highest contributing sector as it has typically been.
“The whole essence of paying taxes is for government to provide, support infrastructure, provide security, but after paying the taxes the industries have to go back again and begin to struggle with this infrastructure,” Muda Yusuf, CEO, Centre for the Promotion of Private Enterprise (CPPE) told BusinessDay. “Some of them even expend a lot of money to construct roads to their premises, they spend a lot of money on water, they spend a lot of money on even security.”
From a point of view of fairness and the morality of taxation, for him, “if these people are the ones generating revenue for you, it’s only fair that you do something special for them so they can generate more revenue for the government.”
Like the rest of the country, manufacturers are not immune to electricity challenges, bad roads, water supply and the myriads of infrastructural needs that would have enabled them function effectively. Yet, being more productive would mean employing more people, and at the same time, remitting more taxes to government, from which it can continue to meet its obligations.
Yusuf even illustrated that in some industrial estates, one would feel sorry for manufacturers, with goods-laden containers falling down because of bad roads, yet, they pay the highest import duties, and company tax.
“What are they getting in return? I think it’s a moral issue that needs to be addressed,” he says.
Opeyemi Alaran, acting director general, Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), describes the situation as “a terrible paradox that the golden goose is the last to be considered in this area of benefit.”
There is a need to accept the reality that there are some socioeconomic considerations that are made in where infrastructure is positioned in Nigeria, which often goes beyond business considerations, he says.
While many considerations at present revolve around infrastructure going here or there because ‘this community needs this level of infrastructure’, he however says that it could be a good time for policy to focus more on meritocracy. This would be in a manner of prioritising tax value going where the economy would benefit more, thereby improving the productivity of industries to create more jobs and paying even more taxes for government to keep meeting its obligations across the country.