The Manufacturers Association of Nigeria (MAN) has expressed apprehension over the reported plans by the Nigeria Customs Service (NSC) to re-introduce the 4 per cent Free-on-Board levy, cautioning against the development which will impact the manufacturing sector, the business community and Nigerians negatively.
The association viewed this new development as unfortunate and retrogressive, claiming that the extensive stakeholder engagement promised has not been inclusive and has not taken into consideration the affected stakeholders, which to a large extent, are manufacturers.
Director General of MAN, Segun Ajayi-Kadir, MAN opined that the overwhelming opinion of a stakeholder engagement would have dissuaded the Service from implementing the levy and proffered a more progressive and sustainable option for increased revenue for the NCS and government. If implemented, Ajayi-Kadir, believes the levy will be an additional burden to the 1 per cent Comprehensive Import Supervision Scheme (CISS) fee being paid by its members at a time that all government agencies should be seeking ways to de-escalate cost of doing business in Nigeria, as it is being done in other climes and economies.
He implored the Federal Government to urgently direct the Nigeria Customs Service to jettison the idea of the re-introduction of the 4 per cent Free-on-Board Levy, warning that the manufacturing sector is increasingly being burdened beyond its well-known resilience thresholds.
Ajayi-Kadir cited the results of MAN quarterly manufacturers CEO confidence index, saying it has continued to show less optimism about the outlook of the sector.
“We should not be heading in a different direction when most governments across the world are aggressively promoting their industrialization agenda and pushing highly nationalist agenda to grow their domestic production,” lamenting that de-industrialization stares the nation in the face. Ajayi-Kadir decried that it was equally worrisome that the move is coming at a time when there is still a looming danger of the unwarranted 15 per cent hike in port charges. “Our members are struggling with the astronomical increase in the effective import duty calculations rate and contending with unprecedented rise in the cost of energy.
“We had expected that the NCS would ultimately rescind the move to introduce the evidently unpopular and ill-timed levy. We didn’t expect to read on the pages of newspapers that the levy will be reintroduced, even before the promised wide consultation with stakeholders like MAN and other private sector organizations. We admonish that the decision should be put away before it worsens and degenerates into an economic quagmire.”
Ajayi-Kadir reiterated that what was needed at this time is the prioritization of improved trade facilitation that would mitigate the prevailing constraints militating against the optimum performance of the productive sector.
The MAN boss posited that, giving the prevailing economic downturn, the imposition of the levy would only exacerbate the spiraling cost of production and ultimately compound the dissipating disposable income of the average Nigeria.
“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 experiencing a demonstrated aversion to introduction of fees and levies by government agencies and institutions. This is the time for all government institutions to recommit to the reduction of the cost of doing business; expanding the scope of businesses and incentivizing new entrants in the face of high business mortality.”
Ajayi-Kadir reeled out reasons why the levy should not be implemented to include that the already high cost of importation due to the prevailing exchange rate used in calculating the customs duty will further escalate.
“This is evident in the cost which had earlier jumped by over 118 percent from N2.07 trillion in the first nine months of 2023 to N4.53trillion in the same period of 2024.
“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.
“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.
“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.
“As an addition to the existing 1 per cent 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.
“The re-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.
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.
