By Kunle Adeliyi
The President of the Manufacturers Association of Nigeria (MAN), Mr. Francis Mesioye, has appealed to the Nigerian Government not to implement the 2023 Fiscal Policy Measures (FPMs) expected to come into effect on June 1, 2023.
Mr. Mesioye stated this at a News Conference in Lagos on the “Increase in Excise Rates for Alcoholic Beverages and Tobacco, as contained in the 2023 FPMs dated 20th April 2023”.
The MAN President explained that the rate of the excise increase was exponential and excessively burdensome as the FPM increased the excise for beer products by about 200 per cent, while the tobacco industry was being taxed five times more than average the average of other industries.
He said that the increase on excise duties on beer and tobacco as contained in the FPM were “an increase on an increase”, since there already an existing approved increase for 2023.
Mr. Mesioye said: “The rate of increase is exceptionally excessive and not consistent with best practice globally. For instance, the excise for beer was effective effectively increased by about 200 per cent, 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 five times more than the average for other industries”.
The President based his argument on the claim that it was not the appropriate time to effect the increases because the manufacturing sector was in acute recession and proceeds from sales are no longer sustaining business overheads and operating expenses, adding that the acute recession was constraining manufacturers to scale down their operations which would result in factory closures, job losses, decline in exports and much more.
He said, “The increase is 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 (which has led to a crash in consumer purchases); limited access to foreign exchange (which has led industry to purchase foreign exchange from the parallel market, thereby increasing costs); record inflation (which further drive-up cost of operation and prices of products) and a struggling economy.
According to him, these challenges have led to a massive decline of -169 per cent in profit before tax for the brewing sector in Q1 2023. 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.
The MAN President stated further that the Nigerian Manufacturing sector recorded a 36 per cent downturn in profit margins from 2021 to 2022 and over 400 per cent in energy costs, further constraining growth of the sector.
He added that the tobacco sector has actively begun to reduce it’s export production from Nigeria as it has over N39 billion trapped in Export Expansion Grant (EEG) incentive not yet released to it by the Federal Government to manage it’s operations.
Mr. Mesioye argued that the increase in excise duty was a direct attack on Foreign Direct Investment (FDI), into Nigeria, which had been on a decline in the last three years according to the National Bureau of Statistics (NBS) data, and may continue if the excise duty tax subsists.