The Manufacturers Association of Nigeria has flayed the recent increase in excise duty for beverage and tobacco goods, stating that it will force businesses to scale down operations while some others may close shops.
They noted that scaling down operations would lead to which factory closures, job losses, and decline in exports among others.
MAN President, Francis Meshioye, expressed his concerns on the development during a press conference held in Lagos to state the position of the association on the recently published 2023 Fiscal Policy Measures.
The MAN boss argued that the excise duty hike “is a flagrant reneging of a promise made to the association by the Federal Government, through the Ministry of Finance, Budget and National Planning on March 23, 2023.”
He noted that the exponential increase in excise duty in the 2023 Fiscal Policy Measures came as a shock to the industry and was, in effect, ‘an increase on an increase’, since there was already an approved increase in place for 2023.
He added that the increase was coming at a time “when the manufacturing sector is immersed in unprecedented crisis and an acute recession, due to extraordinary challenges, namely sustained scarcity of naira, limited access to foreign exchange, high inflation and a struggling economy.”
“The Naira scarcity and limited access to foreign exchange have
exacerbated the continued impact of systemic challenges such as high cost of
operations, multiplicity of taxes, limited electric power supply and Infrastructural challenge.
“For instance, the Nigerian manufacturing sector recorded a 36% downturn in
profit margins from 2021 to 2022 and over 400% increase in energy costs, further
constraining growth of the sector.”
Meshioye lamented that the brewing sector, which would bear the brunt of the excise duty hike had suffered a massive decline of -169 per cent in profit before tax in Q1 2023.
“In addition, the tobacco sector have actively
began to reduce its export production from Nigeria as it has over N39bn+
trapped in Export Expansion Grant incentive not yet released to it by the federal
government to manage its operations.
“Thus, this is not the time to impose
additional increases in excise.The rate of increase is exceptionally excessive and not consistent with best practice globally. For instance, the excise for beer was effectively increased by about 200%, translating to a tripling of excise on the product.
“This is coming against the backdrop of the huge tax burden on the tobacco and beverage sectors, with the tobacco industry being taxed 5 times more than the average for other industries.”
Meshioye explained that significant low sales volumes would lead to business restructuring and a reduction in investment across the impacted sectors.
“The manufacturing sector has been struggling with crashing sales, mainly
attributable to the sustained naira scarcity in recent times. A continuing decline
in sale volumes will necessitate production cuts and a re-evaluation of investments in the sector,”he added.
