335 manufacturing enterprises encountered difficulties in 2023, while approximately 767 manufacturing companies shut down operations, according to a worrying trend within the industry revealed by the Manufacturing Association of Nigeria (MAN).
Many economic challenges, such as fluctuating exchange rates, growing inflation, and a general deterioration of the investment environment, are blamed for this trend.
The manufacturing industry has suffered as a result of these challenges, which have had a major effect on its sustainability and performance.
MAN’s revelations came alongside its criticism of the Federal Government’s newly introduced Expatriate Employment Levy (EEL), which the association argues contradicts the objectives laid out in President Bola Tinubu’s Renewed Hope Agenda and the core principles of his Fiscal Policy and Tax Reform initiative.
The imposition of this levy is seen as a counterproductive measure that could exacerbate the already challenging conditions for manufacturers in Nigeria.
Regarding the Expatriate Worker Levy
Industry stakeholders have expressed a great deal of anxiety over the introduction of the Expatriate Employment Levy. The levy, which costs $10,000 for employees and $15,000 for directors, is a significant rise over the $2,000 formerly charged for the Combined Expatriate Residence Permit and Alien Card, according to MAN.
This new tax is criticized for having the potential to raise the cost of doing business in Nigeria, especially for manufacturers who are already facing many difficulties.
Reduction in Capacity Usage
According to MAN, the manufacturing sector’s capacity utilisation has decreased to 56%. This decline is being exacerbated by rising interest rates and a shortage of foreign money required to buy machinery and necessary raw materials.
Along with a N350 billion backlog of unsold finished goods, the industry also suffers a real growth drop to 2.4%.
A statement from MAN read:
- “The imposition of EEL poses potential impact on the manufacturing sector and the economy at large. This will in turn mark an unwarranted and unprecedented addition to the cost of doing business in Nigeria, especially to manufacturers.
- “The manufacturing sector is already beset with multidimensional challenges. In year 2023, 335 manufacturing companies became distressed and 767 shut down.
- “The capacity utilization in the sector has declined to 56%; interest rate is effectively above 30%; foreign exchange to import raw materials and production machine inventory of unsold finished products has increased to N350 billion and the real growth has dropped to 2.4%. Expatriates in Nigeria currently pay more than $2000 for CERPAC. The sector cannot afford another disincentive to increased investment and portfolio expansion.”
Furthermore, MAN expresses concerns about the possible inconsistency between the EEL and Nigeria’s participation in international trade agreements, including the African Continental Free Trade Area accord, which seeks to improve the unrestricted mobility of skilled labor around the continent.
The association is concerned that the fee may lead to counterattacks against Nigerians employed overseas, impede efforts at regional integration, and damage Nigeria’s reputation internationally.
Given these worries, MAN has warned of the detrimental effects of the Expatriate Employment Levy on the manufacturing industry and the overall economy, and has urged President Tinubu to reevaluate the levy’s implementation. In order to avoid more hardship in the industry and to support Nigeria’s larger objectives of economic expansion and development, the association strongly advises against keeping the charge in place.
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