- Seeks tax, demurrage waivers, others to aid manufacturing
Resultant from several inhibiting factors, including governmental policies and the Covid-19 pandemic, the Manufacturers’ Association of Nigeria (MAN) said that members recorded an all-time high of about N402.4 billion inventory of unsold finished manufactured products in the year under review.
MAN President, Mansur Ahmed, who disclosed this during a press conference in Lagos Thursday as part of the association’s
48th Annual General Meeting (AGM), noted that the sector was still overwhelmed with numerous duplication of taxes, levies, fees and permits, among others, by the three tiers of government.
There remained also the constraints of multiple regulations from different agencies and excessive drive for revenue, as well as the dearth of trade facilitation infrastructure, poor access to the seaports and longer turnaround time for clearance of cargo.
MAN regretted that inadequate electricity supply and incessant tariff increase without commensurate improvement in generation, transmission and distribution has seen the sector spend over N67.38 billion on self-generated electricity, with energy cost accounting for over 38 per cent of production cost in 2019.
To remedy this situation, MAN urged the Federal Government to implement measures that would improve liquidity and ramp up productivity in the sector following the Covid-19-induced slowdown and other challenges.
These include the government scaling down interest rates on existing loan facilities on manufacturing to 5 per cent, with two-year moratorium;
Granting manufacturers investing to raise production loans at 5 per cent interest for a period of five to seven years, and compensating those forced to shut down with 60 per cent of employees’ salaries for at least three months, to prevent lay-off of employees and massive unemployment.
According to Ahmed, “the economy has been fragile and slowly sliding into recession,” as the pandemic disrupted the global supply chain and massively slowed down international trade, causing sectoral groups to run short of raw materials, while many could still not access forex.
The unprecedented challenges caused by the pandemic in Nigeria included lockdown, near shutdown of the operations of eight manufacturing sectoral groups, disruption in supply chain, inventory of unsold items and loss of jobs, he said.
MAN regretted that while the aggregated economy recorded an increase in real national output to 2.39 per cent in 2019 (from 0.81 per cent in 2018), manufacturing sector growth plunged significantly to 0.77 per cent in 2019 (from 2.09 per cent recorded in 2018), while capacity utilisation slowed to 56.8 per cent in 2019 from 57.8 per cent in 2018.
Consequently, the MAN CEO Confidence Index (MCCI) fell significantly to 44.4 points in the first quarter of 2020 as against 51.9 points recorded in the fourth quarter of 2019, thus affirming the negative impact of the outbreak of pandemic on the manufacturers.
“Arising from the scenario, the expectation is that inflation, interest and exchange rates will jointly trend upward from their current states in differing magnitude of between 15 per cent and 18 per cent, and the rate of unemployment will double, reaching the 50 per cent mark for the first time in our history.”
Against this background, MAN has requested the Federal Government to also prevail on the Central Bank of Nigeria (CBN) “to extend its Covid-19 stimulus packages to manufacturers not covered by the existing initiatives;
Grant manufacturers increased access to Foreign Exchange at pre-Covid-19 rate to support the importation of raw materials, machines and spares that are not available locally;
Introduce fiscal measures by waiving import duties on Active Pharmaceutical Ingredients (APIs), other essential products and food-related raw materials for one year effective April 2020;
Extend timelines for filing and paying taxes (including excise duty, with a provision that it should be based on sales and not production) by six months after the economy returns to normalcy;
Reverse the Value Added Tax rate to the pre-2020 Finance Act rate and reduce the Personal Income Tax to a flat rate of 10 per cent for one year effective April 2020. This will improve the disposable income of Nigerian workers, stimulate consumption, promote an upsurge in demand and increase production output;
Direct all regulatory agencies, especially the Standards Organisations of Nigeria (SON), and National Agency for Food and Drugs Administration and Control (NAFDAC) to reduce their respective administrative charges (pre-Covid-19 rates) payable by manufacturing concerns by 50 per cent;
Direct the Nigeria Customs Service, Nigerian Ports Authority and other related agencies of government to treat all requests from manufacturers expeditiously with great sense of responsibility and understanding of the prevailing situation;
As a matter of urgency, direct that cargoes containing manufacturing raw materials are cleared swiftly and ensure compliance with additional free days from the terminal and shipping lines to clear the containers to avoid demurrages as already announced;
Grant manufacturers waivers from all demurrages payable between February and July 2020, especially those occasioned by the lockdown directives of government and others associated with Covid-19 pandemic.
It should also “ensure that the unavoidable shocks that would result from multiple exchange transition to a single exchange regime are properly managed to have minimal effect on the sector.
“Particularly, the burden of foreign currency denominated loans and off-setting of existing credit commitments to foreign suppliers of raw materials should be given priority.”
Meanwhile, the association has asked the government to address the concern about AfCFTA’s trade in goods market access, stating that while it “appreciates a simple, transparent and flexible Rules of Origin, it is important for extensive engagement with the productive sectors before finalisation of the agreement.”
Caption: MAN President, Mansur Ahmed, flanked by the Ag. Director-General, Ambrose Oruche (right), and the National Treasurer, Isaac Ade-Agboye (left) during the press conference in Lagos after the association’s 48th Annual General Meeting