By Merit Ibe

As Nigeria’s business environment continues to deteriorate amid domestic and global headwinds, manufacturers across the country are calling on the Federal Government to intervene urgently to avert the total collapse of the sector.

They lamented that the harsh business environment, coupled with government’ policy inconsistencies, are compelling companies to relocate to neighbouring countries while several new investors are scared to venture into the country’s unfriendly environment.

The question now is how can the Gross Domestic Product (GDP) increase and boost the economy when the manufacturing sector, which is the backbone of any economy is down?

The investment climate in Nigeria is continually overwhelmed with multiple regulations from different regulatory agencies and excessive drive for revenue by government agencies. Dearth of trade facilitation infrastructure, poor access to the nation’s sea ports and longer turnaround time for clearance of cargoes collectively stifle the smooth operations of businesses; inadequate electricity supply and incessant increases in tariff without commensurate improvement in generation, transmission and distribution also remain key challenges.

Investors see all of these challenges and make their investment decision based on the realities on ground.

Apart from investors being scared to come in, big companies are relocating. Nigerians with skills in various disciplines are leaving the shores of the country for greener pastures.

Stakeholders have proffered that government needs to evolve economic agenda that would boost the investment climate of the country.

With the weakening economy, almost all sectors have been affected by the COVID-19 recession, even as unemployment profile keeps rising. Most companies in Lagos are relocating to other states like Ogun, while some others that can’t cope with the harsh business environment in Nigeria relocate to other countries, taking advantage of the liberal investment incentives there.

The implications are high unemployment rates and increase in criminal activities.

members of the Organised Private Sector (OPS) have blamed the Federal Government over its inability to address the alarming bottlenecks facing businesses, including the manufacturing sector.

The OPS argue that inconsistency and lack of coordination in policy formulation by the government are major reasons behind the sluggish growth and development in the manufacturing sector.

They say the manufacturing sector has not attracted significant investments when compared to those of other countries due to regulatory inconsistency.

Frequent reversals of government policies on importation, lack of implementation of the provisions in national policy documents and regulatory lapses are key factors that have affected the sector.

Other challenges, they claim, include but not limited to poor quality of infrastructure which is the longest standing problem and has contributed to the high cost of production..

Bad road networks and inadequate electricity supply make it difficult for businesses to maximise returns and limit the cost of operations.

The stakeholders in the sector explained that in the past, several industrial policies have been reversed mid-way, eroding the gains that could have been obtained.

The Export Expansion Grant (EEG), for instance, was targeted at raising the competitiveness of Nigerian products at the global market. But the grant had been suspended several times.

Nigeria faces several hindrances in achieving its economic and developmental goals. But one of the most profound is policy inconsistency and discontinuity. The lack of stability and continuity in programmes by succeeding governments has been the bane of Nigeria’s stunted growth and development. Very few policies have stood the test of time.

The uncertainty and irregularity of government policies also pose a problem for the macro-economy. Foreign investors are not flooding into Nigeria regardless of the numerous opportunities in the country. Many investors have identified the lack of predictable policymaking as one of the reasons for keeping their distance. But, investors are not the only ones concerned.

Even Nigerians themselves do not trust the system and are reluctant to buy into national government agendas because of the long history of patchiness in government policy.

The erratic nature of policy is also a financial sinkhole in the economy and leads to high costs, which can’t be recovered regardless of the outcome of the investment. “Imagine all the money the Nigerian government has poured into policies and projects that were never fully actualised, like the Ajaokuta steel factory and others,” a financial stakeholder lamented.

President, Manufacturers Association of Nigeria (MAN), Mansur Ahmed, faulted government over its inability to strengthen policies geared at boosting the productive sector.

Ahmed noted that to a large extent, hindrances experienced in the productive sector are largely caused by policy inconsistency and somersaults, which leave no room for proper planning and projection, thereby killing businesses and the sector.

He observed that in spite of the several Central Bank of Nigeria (CBN) policies such as the Naira4dollar scheme, Ban of Sale of Forex to BDCs, the RT 200 FX Programme which stands for the “Race to US$200 billion in FX Repatriation and others, the situation has remained largely the same. While he commended the good intention of the CBN for these policies, particularly to drive support for the real sector of the economy, the MAN President stressed that there was need to establish mechanisms for robust monitoring and evaluation, which ought to be part of the plan to ensure that the support to drive export really comes to fruition.

He said the association which represents the interest of manufacturers in Nigeria, has offered to be a part of this process. “We shall continue to offer recommendations to the government that will increase manufacturing sector’s contribution to the nation’s GDP,” he added.

The OPS, which is the umbrella body of the country’s Chambers of Commerce, comprising Manufacturers Association of Nigeria (MAN), Lagos Chamber of Commerce and Industry (LCCI), Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), MAN Export Group (MANEG), Nigerian Association of Micro, Small and Medium Enterprises (NASME), the Centre for Promotion of Public Enterprises (CPPE) and Nigerian Association of Small Scale Industrialists (NASSI), complained that the cost of doing business in Nigeria was very high, coupled with regulatory challenges among government’s MDAs, policy summersaults (fiscal and monetary policies), infrastructure deficit, exchange rate volatility, forex challenge, multiple taxation, low returns on investment, social amenities challenges, insecurity and more.

All these challenges, according to the OPS, have resulted in many companies leaving, many more closing shop and some others redundant.

The situation has also stopped fresh investors from coming into the country to set up new businesses that would have helped to reduce Nigeria’s unemployment rate.

According to them, no investor will like to invest his hard-earned money in an unfavourable business environment like Nigeria, which is not stable both politically and economically, reiterating that the hallmark of any investment is political and economic stability, especially leadership quality.

On multiple taxes, a survey by the Manufacturers Association of Nigeria (MAN) showed that local manufacturers were paying over 30 different taxes, levies and fees to agencies of the Federal, state and local governments.

Consequently, these multiple taxes and levies, according to MAN’s survey have severely depressed production in the country’s manufacturing sector.

According to the report, many manufacturers operating in the country’s industrial sector are still groaning under growing multiple levies being charged by government agencies.

The report revealed that currently, the SMEs are losing about nine per cent of their total income yearly to multiple agencies, which runs into billions of naira following the over 30 different taxes, levies and fees to these agencies.

Reacting to the report, Director-General of MAN, Segun Ajayi-Kadir explained that there is the need to streamline the observed multiplicity of taxes and ensure that only approved taxes/levies/fees are charged by these agencies of government.

He added that government should begin to consider reducing the various tax rates which have been the global order in recent times to encourage investment.

He explained that majority of businesses agree that multiple/over-regulation by agencies of government depress productivity.

To him, quite often, these agencies regulate the same manufacturing process resulting to man-hour losses, supervisory duplication and multiple regulatory charges.

He advised that it is expedient that government harmonises the operations, regulatory checklists and mandate agencies of government at all levels to promote friendlier operating environment. He stated that levies being paid to the agencies are taking huge toll on operations.

Particularly, he said government as a matter of urgency must listen to the organised private sector by streamlining the agencies now to restore public confidence in ease of doing business in the country.

“I think it is a good policy if the government can streamline these agencies. It will be good to see one-stop shop agencies for the SMEs and manufacturing sector in Nigeria, because right now, this multiple taxation is obviously affecting most of our members. You know they have to take care of so many bills like security, light and other things. When one agency comes with a levy and before you finish with that one, another one comes, it’s quite discouraging.

“With low and worsening disposable income, heightening insecurity and anxiety, caution is the word. What could be within reasonable contemplation should be widening the tax net to capture the largely untaxed endeavours that ought to have been within the tax bracket.

“I’m of the opinion that the net should be expanded to capture those that are not captured and not that existing legitimate and diligent taxpayers would be made to pay more or that additional taxes would be levied upon them. That will be counterproductive and the envisaged additional revenue may not be realised. Instead, we may start to witness dwindling profitability, higher rate of business failure and a predisposition to tax evasion. This is not to mention the disincentive to local and foreign investment.”

Founder/Chief Executive Officer of Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, stated that Nigerian manufacturing companies and indeed most investors, are going through tremendous stress at the moment. They are currently grappling with serious macro-economic challenges and structural constraints impacting capacity utilisation, productivity and competitiveness, he noted, adding that it is affecting sales, turnover, profitability, shareholder value and the sustainability of investments.

“Manufacturers, across all product segments, need a respite, especially in the light of the unprecedented escalation of production and operating costs,” he said.

Yusuf agreed that multiple taxes were over-burdening the private sector. This, he said, is in addition to the burden of dealing with multiple tax agencies from FIRS to states IRS, and Customs, among others, all trying to collect revenue and conduct tax audits. He said the private sector has increasingly become the target for regulatory agencies seeking to raise revenue for government deficit, which continue to take a toll on the private sector competitiveness.

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“Governance issues need to be addressed, as many agencies hardly make full remittance to the government coffers. The private sector has become a target for regulatory agencies, despite not adding any value to the sector.

“Constant imposition of levies and approval of licences are taking a toll on the private sector. There should be a distinction between regulatory agencies and revenue generating agencies,” he submitted.

President of the Lagos Chamber of Commerce and Industry (LCCI), Dr Michael Olawale-Cole advised the Federal Government to focus its attention on other areas to raise funds rather than over-burdening the private sector with additional taxes.

“Of course, tax is a must for everyone, but we should not put too much pressure on the private sector in the area of raising revenue. We are appealing that the Federal Government should expand the tax net as against putting pressure on the very compliant taxpayers.”

President of NACCIMA, John Udeagbala, suggested an increased tax base over increased taxes and leveraging investments through public-private-partnerships in exchange for tax credits spread over time, noting that it is now generally accepted that the current levels of debt service payments are considerably high and unsustainable given dwindling government’s revenues.

Udeagbala said over taxation is driving away foreign investors and when businesses are over burdened with multiple taxes, they collapse.

His words: “You set up a business, you pay tax before the business starts, government collects tax to register the company, you pay stamp duty which is now 1.5per cent. This is burdensome.

“We pay for security, light we don’t even get, infrastructure; fuel diesel prices keep going up. It does not make economic sense to add further burden on businesses.

“The private sector is doing 99 per cent. What is government doing other than increasing tax and nothing to show for it. Over taxation makes business in Nigeria less competitive. Every government in other climes reduce the burden of the private sector and businesses, but ours is a different case.

“Government is supposed to provide funding to sustain businesses in this difficult era. The solution is not additional tax but to increase the tax base and make our companies and businesses competitive.”

Udeagbala said most of our governor’s travel out of the country to source for foreign direct investment and wondered: “But what happens to our local investors? Our local investors should be considered first and funded.

On the other hand, these taxes are revenues; they should be reinvested for the industries to produce more. Let’s not kill our industries.

“The African Continental Free Trade Agreement (AfCFTA) is a good source to generate revenue. The private sector keeps engaging government in the ease of doing business to expand and get more revenue. If we continue to operate below par, the tax issues will continue to be daunting and the ratios will be increasing if we don’t increase the tax base

Chairman, Oil and Gas Sectoral Group of MAN, Dr Michael Adebayo lamented that industrialists were groaning in pain, which has led to the exit of industries to neighbouring countries.

“Due to power challenge, most industries have relocated to neighbouring countries. The few firms in the country are finding it difficult to remain in business.”

He maintained that the cost of production was increasing by the day, resulting in dearth of industries.

“Industries are collapsing by the day. The likes of Toyota, Volkswagen, Michelin and others have left the country over the poor conditions of doing business,” he said.

Chairman, SMEs Group of the Lagos Chamber of Commerce and Industry (LCCI), Daniel Dickson -Okezie said multiple taxation is really affecting profitability. “It has affected the manufacturing sector just like other sectors. When profitability is on the decline, there is the tendency for investors to withdraw their investment, leading to high rate of business failure.  We have an unstable forex policy. A wrong decision made in one sector of the economy affects other sectors and all businesses. The budget affects businesses.

“Everything seems to be working against businesses and it appears there is no good economic team managing the affairs of the country. Outside taxes and forex, most of the problems we have in business are not just problems of regulation like border closure, policies by the CBN. There are other factors like insecurity.”

He explained that Nigeria’s economy is planned on oil, noting that as long as the oil is being stolen on daily basis, government cannot meet up with its plans. As such to rake in and beef up revenue, government increased taxes in 2021. The OPS is of the view that for a more positive result, government should widen the tax net.

“Increase in taxes tends to increase inflation. With inflation, purchasing power is reduced, then companies will not sell, and when they don’t sell they, they don’t pay taxes. If they pay, they pay less. In the long run, it does not benefit the government. So what a wise government can do in the present situation is to expand the tax net and involve those who are not covered in the tax net. Many businesses are not paying taxes and those who are paying are over-burdened.”

To him, for government to achieve its aim on taxation, it should make sure that before taxing people, it must  be sure of the evidence of capacity to provide goods and services. Government should also create the enabling environment for the people you are taxing to do business and make more money to pay more taxes.

Apart from multiple taxation, he also noted other factors killing manufacturing in Nigeria. “The ease of doing business is being eroded. The business environment is harsh. I’ve been working with the executive chairman of the FIRs trying to ensure compliance by the regulatory agency, but how can we go round the whole country?

Policy somersault of government and the CBN worsened the situation of manufacturers. The power issue is getting worse by the day; it’s not improving at all.

Due to insecurity situation in the country, a lot of industries and companies are closing shop in the North, and in the South-East, investors are afraid of investing except indigenes who believe their businesses must thrive no mater the situation.

“The economy is not conducive for investment. The real sector is suffering so much.  Factories are closing and some relocating to other West African countries.

No improvement in the regulatory system, as corruption has pervaded the system. Manufacturers and importers pay so much to get their products standardised or upgraded by the SON, NAFDAC and some other agencies.

“There is corruption in the system as regards government’s regulatory agencies.

Multiple taxes are killing companies.”

Dickson-Okezie, who is also a member of the Federal Inland Revenue Services (FIRS) Working Group Committee, asserted that there has been improvement in recent times.

Dickson-Okezie said the FIRS and LIRS have done well in trying to reduce cases of double taxation, especially in situations where one pays to the Federal Government and still pays similar tax to state and local governments.

He noted that double taxation seems to be worse with the local government. “That of the local government is yet to be fully taken care of. The case of vehicle stickers and taxes for haulage still persist.  The organised private sector is still kicking against such.”

He lamented that the major challenge businesses are having with taxes and regulatory agencies is the issue of corruption in the system, which discourages investors. “Rather than see how they can generate revenue for the government through civil means and the normal way, using persuasion, the tax agencies extort and harass business owners. FIRS is trying in recent times to create awareness  by opening some windows that can make SMEs pay their taxes easily, when you get down to various tax offices, their attitude discourages business owners.”

He noted also that corruption in the tax system in the country discourages investors and reduces government’s revenue, which makes it difficult for government to generate its actual revenue.

“Tax agencies try to discourage genuine business owners by way of incessant harassment and extortions. There are some traders who don’t pay tax; they need to be discovered so as to expand the tax net, not discouraging those who are already genuine tax payers.

“The Customs is another major problem. They are killing businesses. They are suppose to ensure people pay taxes and ensure that contrabands are not brought into the country, but you see them along the road stopping those who legally bought rice. But what they are to do at the borders, they don’t.

“The CAC is another regulatory agency that is to ensure that all companies and organisations are registered and file annual returns to the CAC. Now you find out that their own problem is the issue of killing the idea of ease of doing business. You are asked to go online and register and at the end of the day, you find some little things that will make the exercise impossible. At last, you get back to their office where the staff will extort money from you. These agencies frustrate business in one way or the other,” he said.

Chairman, Apapa branch of MAN, Frank Onyebu, explained that the real sector of the economy has borne the brunt of this harsh economic reality to the extent that majority of businesses are currently struggling. He said several businesses are actually distressed, with some at the brink of bankruptcy.

“The fact that businesses are still surviving is based on the resilience of Nigerian entrepreneurs. The government, unfortunately, has done very little to change this narrative. Unlike other countries, where governments have taken proactive measures to reflate the economy, our governments (at all levels) are busy introducing new taxes.

“The economy has been daunting for the manufacturing sector due to a number of oft-repeated challenges like infrastructural deficiency, insecurity, FOREX illiquidity, inflationary pressure, weakening purchasing power, multiple taxation, port related issues, and policy summersault to name but a few. Our quest to achieving our goal of being one of the key drivers of Nigeria’s economy through massive job creation is threatened by these challenges. I must warn that job losses are imminent unless these challenges are tackled with utmost urgency.”

He urged the Federal and state governments to reduce taxation for businesses to thrive in Nigeria.

“The level of tax on businesses in Nigeria currently is so high. There is need to grant tax holiday to infant companies coming in. They can decide to give any company coming up in Nigeria five years without paying tax to support them to succeed and employ people.

“I can say that over 50 per cent of crimes today is because of poverty.  So, it will help to boost the economy and reduce unemployment. Reducing taxation will help businesses to grow. The government should not be killing business with multiple taxes.”

Dr Jude Eluma, Chairman, MAN Imo/Abia, said in terms of government policies on taxation, the consequence is the erosion of all the gains achieved by manufacturers in Nigeria, which affect the socio-economic values of the nation.

“Businesses are shut down and future investment stopped. These have brought the GDP very low,” he said.