Soothing Balm for Manufacturers

Dike Onwuamaeze posits that the announcement of four executive orders last week to address some of the bottlenecks militating against the fortunes of the Nigerian manufacturing sector, came as a beacon of hope to the sector and a pointer to good government-business relation  

The Nigerian manufacturers heaved a sigh of relief on July 6. On that day, President Bola Ahmed Tinubu announced four executive orders that override certain business unfriendly fiscal policy measures and multiple taxations that were enacted by ex-President Muhammadu Buhari’s administration.  

The executive orders are the Finance Act (Effective Date Variation) Order, 2023 and the Customs, Excise Tariff (Variation) Amendment Order, 2023. The third is the order suspending the 5.0 per cent Excise Tax on telecommunication services as well as the Excise Duties escalation on locally manufactured products. The last and fourth order suspended the newly introduced Green Tax by way of Excise Tax on Single Use Plastics (SPU).

The Presidential Special Adviser on Special Duties, Communications and Strategy, Mr. Dele Alake,  who announced the orders during a press briefing in Abuja explained that the executive orders were needed to avoid making “life difficult for Nigerians or asphyxiate corporate entities.” They also further demonstrate the readiness of Tinubu’s administration to “constantly dialogue with Nigerians and lend a listening ear to their concerns.”

The new executive orders differed the commencement date of the Finance Act (Effective Date Variation) Order, 2023, from May 28, 2023 to September 1, 2023, to ensure adherence to the 90 days minimum advance notice for tax changes as contained in the 2017 National Tax Policy (NTP). Similarly, the effective date for the introduction of the Customs, Excise Tariff (Variation) Amendment Order, 2023, was also shifted from March 27, 2023, to August 1, 2023, in line with the NTP

Furthermore, President Tinubu also gave an order suspending the 5.0 per cent excise tax on telecommunication services as well as the excise duties escalation on locally manufactured products.

Alake also announced that in furtherance of Tinubu’s commitment to creating a business-friendly environment, “the president has ordered the suspension of the newly introduced Green Tax by way of excise tax on Single Use Plastics (SUP), including plastic containers and bottles. In addition, the President has ordered the suspension of import tax adjustment levy on certain vehicles.”

He stated that the Tinubu’s administration has noticed that some of the tax policies are being implemented retroactively with their commencement dates, in some instances, pre-dating the official publication of the relevant legal instruments backing the policies. This lacuna has created some challenges of implementation.

“We wish to state that the intentions behind upward adjustments of some of these taxes are quite noble. They were designed to raise revenue as well as address environmental and public health concerns. However, they have generated some significant challenges for affected businesses, and elicited serious complaints amongst key stakeholders and in the business community.

“Let me mention some of the problems we have identified with the aforementioned tax changes. A document known as the 2017 NTP approved by the Federal Executive Council of the last administration prescribes a minimum of 90 days’ notice from government to tax-payers’ entities before any tax changes can take effect.

“This global practice is done with a view to giving taxpayers and businesses reasonable time to adjust to the new tax regime.

“However, evidencing part of the gaps pointed out earlier, both the Finance Act 2023 and the Customs, Excise Tariff Order 2023 did not give the required minimum notice period, thus putting businesses in violation of the new tax regime even before the changes were gazetted.

“As a result of this, many of the affected businesses are already contending with the rising costs, falling margins and capacity underutilisation due the various macroeconomic headwinds as well as the impact of the Naira redesign policy.

“Gentlemen of the press, you will also recall that Excise Tax increases on tobacco products and alcoholic beverages from 2022 to 2024, which had already been approved, are also being implemented. But a further escalation of the approved rates by the current administration presents an image of policy inconsistency and creates an atmosphere of uncertainty for businesses operating in Nigeria.

“We have also seen that the Green Taxes, including the Single Use Plastics tax and the Import Adjustment Levy on certain categories of vehicles require more consultation and a holistic approach to the country’s net zero plan in a manner that does not impact the economy negatively,” he said.

Alake announced these orders at a press briefing that was titled, “Presidential Interventions on Major Concerns of Manufacturers and Other Stakeholders Regarding Some Recent Tax Changes.” 

He reassured the Nigerian business community that “the president is committed to reviewing complaints about multiple taxation and anti-business inhibitions.

“The federal government sees business owners, local and foreign investors as critical engines in its focus on achieving higher GDP growth and appreciable reduction in unemployment rate through job creation.

“The government will, therefore, continue to give requisite stimulus by way of friendly policies to allow businesses to flourish in the country.

“President Bola Tinubu wishes to assure Nigerians by whose sacred mandate he is in power, that there will not be further tax raise without robust and wide consultations undertaken within the context of a coherent fiscal policy framework.”

As soon as the Alake was done with the announcement of the executive orders, the Nigerian manufacturers went agog in jubilation as they described the executive orders as a very good development. They had pleaded to no avail with the Buhari’s administration to nullify the policies.  

MAN Applauds FG

Commenting, the Manufacturers Association of Nigeria (MAN) said that the new executive orders “obviated the looming existential threat on some sub-sectors in the manufacturing landscape.” The Director General of MAN, Mr. Segun Ajayi-Kadir, commended Tinubu for issuing the executive orders and added a historical perspective to the development. He said that the last administration had revised upward the excise duty as contained in the 2023 fiscal policy measure without any impact assessment and adequate consultation with stakeholders in the manufacturing sector.

Ajayi-Kadir pointed that some of the added tax burdens in the 2023 fiscal policy measures were arbitrarily introduced They include the green tax and escalation of the excise duty on alcoholic beverages, wines and tobacco in violation of subsisting government approved roadmap.

He said: “These clearly contradicted the government’s commitment to maintaining policy stability to boost investment and enhancing business confidence in the manufacturing sector. We indicated that the policy is an additional burden too high to bear, as we were also struggling with low patronage, high borrowing cost, and huge energy costs in a highly inflationary environment.

“So, the unwarranted and clearly disingenuous escalation of excise and introduction of new taxes in the 2023 Fiscal Policy Measures had the potential impact of truncating the business projections of producers and assaulting the purchasing capability of the average Nigerian.

“It is, therefore, worthy of commendation that the President Tinubu took due and far-sighted notice and consideration of the concerns.

“In keeping with the trend of positive policy initiatives that we have seen with his administration, the four executive orders have put paid to the anxieties of manufacturers in the affected sectors in particular and operators in the expansive value chain in general.”

He added, “the suspension of the obnoxious aspects of the 2023 Fiscal Policy Measures, which arbitrarily imposed additional tax burden on the manufacturing sector, is a welcome development and has removed a looming clog on its operations and productivity.

“Manufacturers in the affected sector are pleased and we can now reconnect with our projections and plans made in the beginning of the year. We expect that the Nigeria Customs Service will now stand down the requirements for compliance with the excise escalation and the registration for the green tax.”

The MAN said that it looks forward to further engagements with the federal government that would give fillip to the new policy measures President Tinubu has enunciated, so that the challenges that would emerge could be effectively mitigated.

According to the association, “the pursuit of tax increments on already tax-burdened industries is inimical to the growth of the manufacturing sector.”

CPPE Commends FG

Speaking in the same vein, the Centre for Promotion of Private Enterprises (CPPE) applauded the recent executive orders.   

The Chief Executive Officer of CPPE, Dr. Muda Yusuf, hailed the announcement of the executive orders as a demonstration of the sensitivity of the Tinubu’s administration to the predicament of the manufacturing sector amid overwhelming headwinds and hassles to real sector activities in the Nigerian economy.

According to Yusuf, the manufacturing sector is a part of the troubled Nigerian economy. Its growth slowed to 1.6 per cent in the Q1 of 2023, from 2.8 per cent it recorded in the fourth quarter of 2022 after it has contracted by 1.9 per cent in the third quarter of 2022.    

He said: “Many manufacturers are currently struggling 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.”

Reacting to the announcement of the four executive orders, the Director General of Nigerian Employers’ Consultative Association (NECA), Mr. Adewale-Smatt Ayorinde, commended the federal government  

Speaking in Abuja, the Director-General of the Association, Mr. Adewale-Smatt Oyerinde, commended the federal government and stated that the issue of multiplicity of taxes has become a major challenge to organised businesses in the country. 

Oyerinde stated that currently businesses are made to pay  over fifty different  taxes and sundry charges, among which are: Corporate Income tax, import duties, export duties, excise duties, rents, capital gains tax, personal income tax, value added tax, stamp duties, property tax, licenses, motor parking fee, motor vehicle fee, withholding tax, land tax, market license fee, road tax, business premises, dividend tax, NHIS levy, advert fee, regulation fees, the new NYSC levy as well as the regular user charges such as electricity, water, disposal fee, etc. 

He said: “The huge tax burden, no doubt, has been a clog in the wheel of overall performance of organised businesses over the years.  We had, at numerous for a, expressed concern on the escalation of taxes including exercise duties and its adverse implication on the business operating environment.”

NECA Elated

He added that NECA “is indeed elated with the news of the  executive orders, particularly  with the suspension of  the 5.0 per cent excise tax on telecommunication services;   suspension of excise duties  on Tobacco (30 per cent ad valorem rate with the introduction of specific rate of  NGN 4.2/stick of cigarette for 2022; N4.7 per stick  for 2003; and N5.2/stick in 202); Beer (N40/lite in 2002;  N45/lite in 2023 and N50/lite 2024); and Wine/Spirit  (20 per cent ad valorem rate with  a specific rate of N50/litre in 2022) as proposed in the 2022 fiscal policy statement.

“The suspension of 10 per cent Green Tax by way of excise tax on Single Use Plastics (SUPs), including plastics containers and bottles; Import Tax Adjustment  (IAT)  of 2.0 per cent on  imported motor vehicles of 2000 cc to 3999 and 4.0 per cent on  4000 cc  engines. The new Orders will no doubt, support the efforts at improving the operating environment and mitigate the high cost of doing business in Nigeria, particularly with the aftermath of the removal of fuel subsidy.”