VAT

•Says it will lead to more job losses, compound employment crisis

•Wants realistic strategy to cushion effects of subsidy removal

By Victor Ahiuma-Young

THE Organised Private Sector of Nigeria, OPSN, through the Nigeria Employers’ Consultative Association, NECA, weekend, urged the Federal Government, in the interest of Nigerians and the economy to suspend the reintroduction of excise duty of 10/litre on carbonated drinks and further hike in Value Added Tax, VAT.

It also called for urgent initiatives by government to deepen engagement with critical stakeholders,  including employers and organised labour with the view to arriving at a more realistic strategy to cushion the effects of the subsidy removal on workers, employers and generality of Nigerians.

OPSN comprises of Manufacturers Association of Nigeria, MAN, Nigeria Association of Chambers of Commerce, Industry, Mines and Agriculture, NACCIMA, NECA, Nigeria Association of Small Scale Industries, NASSI, and Nigeria Association of Small and Medium Enterprises, NASME.

NECA is the umbrella body of all employers of labour in the country and current secretariat of OPSN.

NECA, in a statement contended that government should continue to support and promote manufacturing industry to attain full recovery after the onslaught of COVID-19 pandemic and position it to further accommodate the teeming unemployed Nigerians, particularly the youths

In the statement titled: ‘Growing Concerns for Survival of the Manufacturing Sector in 2022 and Beyond: NECA Calls for Suspension of Excise Duty, Further Hike in VAT,’  it said: “NECA has also noted the contents of both the 2022 Appropriation Act (Budget), Finance Act 2021 and wishes to draw the attention of government and Nigerians to some areas that could lead to challenges – increased number of industrial actions, job losses and rising unemployment, etc.

“Noticeable among the concerns is the planned re-introduction of excise duty on carbonated drinks. We may recall that in 2009 during the global financial crisis, excise duties on carbonated drinks were suspended to aid the sustainability of businesses. We make bold to say that the economic situation which necessitated the suspension of the excise in 2009 has not abated, but rather, worse. In fact, businesses currently face greater hardship than what obtained in 2009. “Thus, the introduction of the tax will be counter-productive as it will lead to further stifling of businesses in the manufacturing industry.  It will result in reduction of the purchasing power of the masses as any increase in price will likely be passed to the consumers.

Incentive for industries

“Globally, at a time like this, governments continue to provide incentives for industries to speed up recovery from the shocks of COVID-19 pandemic, inflation and escalating costs. Nigeria cannot afford to be doing the exact opposite as manufacturers, across all product segments need a respite, especially in the light of the unprecedented increase in production and operating costs.

“It is instructive to note that manufacturers in the country have been contending with the dislocations caused by the pandemic and the recession that followed.  They are also facing serious crisis resulting from liquidity challenges in the foreign exchange market, which is impacting adversely on the cost of production, sales, turnover, profitability and shareholder value.

“In addition, they are confronted with intense pressure arising from numerous structural bottlenecks that are creating sustainability challenges for investors, especially those in the SME segment. Further,  there are concerns with the significant spike in cost of raw materials, investment capital, high import duty, energy, transportation and logistics/shipping among others.

It is imperative that government, in the interest of Nigerians and the economy, should suspend the reintroduction of excise duty on carbonated drinks.

“Rather, government should continue to support and promote the industry to attain full recovery after the onslaught of the pandemic and position it to further accommodate the teeming unemployed Nigerians, particularly the youths.

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“Secondly, the Organised Private Sector in Nigeria is clamouring for business environment that will be agile, less bureaucratic and cost-effective to support general business operation, with the quest that the Private Sector would support the National Development Plan (2021-2025) with about N298.3 trillion and lift over 30million Nigerians out of the poverty lines through creation of decent jobs over the period.

“It should be noted that the private sector has the potential to achieve the set target; however, there is need to treasure and nourish the bird that lays the golden egg, by providing the enabling business environment for businesses to thrive. A further hike in Value Added Tax, VAT, would only increase the revenue of government temporarily, as this would further translate to reduction in consumption for some items, loss of jobs to workers in the production value chains of those items as well as negatively impact overall government revenue projections, etc.

“Thirdly, as we aligned our thoughts with the aspiration of the current administration in the removal of fuel subsidy, as the current subsidy regime is not sustainable, with the subsidy payment hovering around N150billion monthly and around N2trillion annually, with the removal of subsidy, the funds that would be saved could help address the wide infrastructural deficits and other gap in the country.

“We urge government to urgently initiate a deepened engagement with critical stakeholders including employers and organised labour with the view of arriving at a more realistic strategy to cushion the effects of the subsidy removal on workers, employers and the generality of Nigerians. Past efforts at providing palliatives have proved to be cosmetic, shallow and unsustainable. We state that fuel subsidy removal based on the argument of international oil prices and other parameters without considering the context of those climes will be unrealistic within the context of our environment.”

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