By Adedapo Adesanya
The Manufacturers Association of Nigeria (MAN) has asked the federal government to suspend the planned excise duty increase on alcoholic beverages and tobacco, arguing that the headwinds in the economic environment would put more pressure on members.
At a stakeholders’ meeting on Tuesday, MAN raised significant concerns about the provisions of the 2023 Fiscal Policy Measures (FPM), including the record increase in excise on beverages and tobacco and the introduction of a tax on Single Use Plastics (SUP), amongst others.
Speaking at the event, the president of the association, Mr Festus Meshioye, lamented that the FG, despite past assurances that it would not increase excise in beverages and tobacco, reneged and has planned a new increase as contained in the 2023 Fiscal Policy Measures (FPM).
The Muhammadu Buhari administration initiated a 3-year excise roadmap system in 2018 after extensive consultation with the industry, and the roadmap ran successfully until its conclusion in 2021 without any change or issues.
MAN said this enabled the industry to plan its operations, given the certainty in excise successfully. In 2021, the government retained the excise rates for 2020/21 until May 2022, while it used the 1-year period to engage extensively with the industry to decide on a revised roadmap.
Following this engagement, the government released the 2022 FPM with a revised 3-year excise roadmap which, though providing for higher excise rates, still took into consideration input from the industry and the potential impact on the economy.
However, barely five months into the implementation of the 2022 excise roadmap, the industry became aware of fresh plans by the government to increase excise rates further.
MAN bemoaned this development and said this signifies ‘an increase on the increase’ since there was already an approved increase in place for 2023.
Mr Meshioye said that the manufacturing sector is immersed in an unprecedented crisis and an acute recession due to extraordinary challenges, which he said include “sustained scarcity of naira which has led to a crash in consumer purchases; limited access to foreign exchange, which has led the industry to purchase foreign exchange from the parallel market, thereby increasing costs; high inflation which is driving up the cost of operation and prices of products and a struggling economy.”
“This has impacted the industry. For instance, the brewing sector suffered a massive decline of 169 per cent in profit before tax in Q1 2023. Also, the industry turnover for non-alcoholic beverages and tobacco declined by 15 per cent, while gross profit and profit before tax declined by 31 per cent and 96 per cent within the same period, respectively,” he revealed.
He also noted that other worries include the burdensome increase in excise on beer and tobacco, which have tripled and quintupled as well as the impact on sales due to the Naira scarcity.
He warned that, “A continuing decline in sale volumes will necessitate production cuts and a reevaluation of investments in the sector. Specifically, if sales proceeds can no longer sustain business overheads and operating expenses, businesses will be forced to scale down their operations which would result in factory closures, job losses, a decline in exports, and much more.”
MAN also warned that a decline in sales and profitability of the industry would result in a decline in the industry’s total tax contribution to the government because company income tax (CIT), value-added tax (VAT), and education tax are directly tied to the performance and profitability of the companies.
The association further warned that it would not be able to support other businesses within its value chain, cutting across agriculture, logistics, bottling, labelling, and packaging businesses, as well as distribution, wholesale, and retail businesses, catering to over 950,000 direct and indirect employees.
MAN then called on the outgoing government to suspend the 2023 FPM and retain the 2022 -2024 excise duties roadmap as approved in the 2022 FPM to foster stability in the affected sectors and their value chain in the interest of the national economy.