The Manufacturers Association of Nigeria (MAN) has condemned and express its grave concern over the sudden and inopportune introduction and implementation of the 4% Free-on-Board Levy by the Nigeria Customs Service ( NCS).
The Director General of the association Segun Ajayi-Kadir mni while condemning the action views this development as an unfortunate addition to the 1% Comprehensive Import Supervision Scheme (CISS) fee being paid by its members at a time that all Government agencies should be seeking ways to deescalate cost of doing business in Nigeria, as it is being done in other economies.
He also stated that this is coming at a time when there is a planned 15% hike in port charges and industries are struggling with the astronomical increase in the effective import duty calculations rate.
“We had expected that the NCS would give priority to trade facilitation in view of the prevailing economic downturn, rather than exacerbating the spiraling cost of production.”
He noted that this will have potential wider implications on the economy in the form of low productivity, increased unemployment rate and consequent higher propensity to criminal activities and insecurity, not to mention the negative impact on the disposable income of the overall economic wellbeing of the over 220 million Nigerians.
We had expected that, in line with the prevailing economic reform agenda of government that seeks to streamline fiscal policies and engender a progressive and business friendly tax regime, we should be witnessing a winding down of regulatory and official fees by government agencies and institutions, he said.
DG further urged all government institutions to recommit to the reduction of the cost of doing business, expanding the scope of businesses and broadening the nation’s revenue base.
He further added that MANs aversion to the introduction of the levy is further predicated on the following reasons:
1. The already high rate of calculating the customs duty exchange rate and the new levy will further escalate the cost of imported raw materials, which had earlier jumped by over 118 percent from ₦2.07 trillion in the first nine months of 2023 to ₦4.53 trillion in the same period of 2024.
2. The levy will cause heavy disruption in supply chain, trigger raw materials stock-out in many manufacturing concerns, inflict higher cost of demurrage, further increase the huge volume of unsold inventories and worsen the competitiveness of Nigerian manufacturers.
3.The levy is coming at a time when the headline inflation has hit a historic record of 34.8 percent in nearly three decades and majority of Nigerians are struggling. Therefore, the impact on the cost of locally produced items will be instant and far reaching.
4.The introduction of the levy contradicts the principles of the ongoing Fiscal Policy and Tax Reforms and the spirit behind the tax bills currently being considered by the National Assembly. These efforts are targeted at eliminating multiplicity of taxes and reduction of tax burden for households, manufacturers and other private businesses.
5. As an addition to the existing 1% CISS fee, extant duties and other cargo clearance charges, the new Customs Operations levy will increase import transaction costs, compound the already high cost of doing business significantly.
6. The introduction of the levy is an additional incentive to smuggling, trade diversion, under declaration of duty and other trade infractions that has bedeviled our country, stretched the capacity of our Customs Service and undermined the revenue profile of the country.
7. It will jeopardize the plan of the Federal Government to boost forex earnings through non-oil export, as many manufacturing exporters rely on imports for vital inputs and machines that are not available locally.
8. The levy will jeopardize our aspiration to be an investment destination of choice and an industrial hub in the West African sub-region.
“The need to increase government revenue is not lost on manufacturers. We have consistently advocated for the expansion of the tax base and not introduction of new taxes or increase in existing ones. It is not helpful to kill the goose that lays the golden egg, said DG
Appreciable improvement in trade facilitation infrastructure and processes would encourage significant increase in volume of transactions and give rise to the much needed revenue for Government.
MAN in view of all implore the Federal Government to urgently direct the Nigeria Customs Service to halt the implementation of the 4% Free-on-Board Levy.
“We equally urge Mr. President to direct the Service to engage with relevant stakeholders and the Presidential Committee on Fiscal Policy and Tax Reform in order to align with the ongoing landmark and wholesale reform agenda of Government.”
“We believe that this consultative approach will engender the mainstreaming of the input of relevant economic actors; repurpose the revenue aspiration of the Service and reassure the business community of the commitment of the Tinubu administration to the advancement of the domestic economy. In conclusion, it is imperative to state that the Nigerian manufacturing sector is increasingly being buffeted and burdened beyond its well known resilience thresholds.”
“The results of our quarterly manufacturers CEO confidence index has continued to show less optimism about the outlook of the sector. We admonish that many of our members are actively considering divesting or relocating their businesses to more conducive neighboring countries. All these are the result of the consistent and persistent cost escalation trajectory that we have witnessed in more recent times.”
There is therefore wisdom in halting the drift and intentionally averting what promises to be an unenviable de-industrialisation episode in our history. It cannot be the intention of government to decapitate the productive sector, especially when President Tinubu has rightly and consistently promised to promote domestic production, incentivize export and quite importantly, create a $1trillion economy by 2030, he concluded.