The Nigerian government has shifted the goal post in a match, just when its opponent was about to score.
This could be inferred from the response of the Centre for the Promotion of Private Enterprise (CPPE) on the news of increment in excise duty and tax as contained in the 2023 fiscal policy measures of the Federal Government.
According to the body, the decision of the government would significantly hurt the economy.
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Nigeria’s economy that is still neck-deep in high inflation rate would suffer the negative effect of the decision.
It would hurt the economy because it would affect manufacturers, investors and the consumers are not left on the list.
Muda Yusuf, said the construction and transportation sectors were also vulnerable to fiscal policy-induced downside risks.
He noted that some of the measures could aggravate inflationary pressures which are detrimental to economic growth and manufacturing, construction and transportation sectors.
“It is a double whammy for economic players to contend with a regime of high import duty, and prohibitive tax rates amid a depreciating currency,” he said.
Promoting Economic Growth
He explained that fiscal policy measures must seek to ensure a good balance between objectives of revenue generation, boosting domestic production and enhancing the welfare of citizens.
It must also seek to promote economic growth, deepening economic inclusion, facilitating job creation and recognising societal ethos, beliefs and values.
Commenting on the excise duty on beverages, drinks and wines, the CPPE Boss said it should be noted that the Ad valorem tax was based on the value of the product, making the impact even more injurious to industrialists.
He added that sustaining current investments in these sectors would be a herculean task.
“These policy measures failed to reckon with the multifarious challenges which industry operators are currently grappling with, some of which include the following.
“Weak and declining consumer purchasing power, Naira exchange rate depreciation which is taking a huge toll on the cost of production, High energy cost,” the statement said.
Risk To Jobs
He added that multiple taxes and levies were already being imposed on the industry players.
“Risk to jobs in the sector and its extended value chain including millions of MSMEs in its distribution and marketing chain and Downside risk to manufacturing sector outlook in the Nigerian economy,” he said.
According to him, the implications for the sector and the economy include drop in sales for investors in the sector, a negative effect on tax revenue from the sector, and loss of direct and indirect jobs which could be in a couple of millions.
It is also expected that millions of farmers supplying local inputs such as grains to the sector may lose their livelihoods, risk of decline in profitability and shareholder value and elevated risk of smuggling of the products.
Import Duty
The CPPE boss said it is difficult to justify the 40% import duty on vehicles.
He noted that Nigeria is about 90% dependent on road transportation which underscores the importance of motor vehicles in the economy.
“There is an increasing affordability problem for citizens with regard to vehicle acquisition, especially by the middle class of Nigerian society.
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“Costs of locally assembled vehicles are beyond the reach of most Nigerians, contrary to the assurance given by the government at the inception of the auto policy,” he said.
He further explained that there is limited access to credit for vehicle purchases by Nigerians.
“Over 90% of purchases are done out of pocket, which is extremely challenging. And where the credit facilities exist, the interest rates are outrageous, between 25-30%,” he added.
“The economy has experienced huge exchange rate depreciation which had already exacerbated vehicle acquisition cost in the first place.”
Furthermore, Yusuf noted that it was therefore insensitive of policy makers to impose a whopping 40% import duty on vehicles in an economy where there is no mass transit system and where vehicle ownership has become a necessity.
