Multiple taxation, insecurity forcing manufacturers out of business – MAN DG

The Director-General of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, has confirmed that insecurity, multiple taxation, high energy cost are some of the major challenges manufacturers face in Nigeria.

Ajayi, who made the disclosure in an interview with Channels Television Sunrise Daily, urged the government to come up with policies that will help improve the performance of the manufacturing sector.

Excerpts of the interview is published below…

What is the current situation now; the general operating environment for manufacturers?

Well, to be frank, the environment is tough, just like most other sectors and it’s actually a global trend that we have seen in business. Generally speaking, after recovery from Covid-19, the geopolitics that we have seen, the wars, and the tension have generally impacted business. In Nigeria, we have had quite a number of reforms that came with this administration, necessary reforms I must say, but they have thrown up issues that we needed to deal with quickly for us to be able to get the economy back on track, and for us to consistently work towards ensuring that those reforms lead to gains that they were intended. So, I think these are tough times. We need our thinking caps on and for all hands to be on deck, particularly government cooperating with the stakeholders so that we are able to go through the period that is obviously tough, not only for businesses but for individuals in the country.

The government would always say it is doing the best for the people but the people are on a different page ever since the petrol subsidy removal. We’ve seen the cost of products and services in the market out there. Do you think the government is addressing the issues that should be addressed?

I think we need to continue to work with them (the government) so that they will address the issues that they need to address. There are quite a number of steps they have taken that indicate quite frankly that they are conscious of the situation we are in. But then we still need to have some strong conversations that will ensure that we are all on the same page. Governance has to do with the private sector and the public sector cooperating and working together. We do not and we cannot afford the lord-and-master relationship. We operate in an economy where the private sector has a lot of stakes and the federal government or the public sector has a duty to provide for the overall wellbeing of the people. So, there has to be this synergy for us to make progress.

There has been quite a number of reforms that this administration has taken and whether we like it or not, it is the way to go. But then, how do we deal with the fallout activities? That is what is very important. There is no doubt that we needed to float the forex rate, we needed to remove subsidy. But how do we deal with the negative fallout? How do we ensure that businesses survive? That can only happen if you engage effectively, adequately and truthfully with those who operate in that sector for you to get the necessary feedback. You’ll achieve your objective faster with lesser pain and with less adjustment period because everybody needs an adjustment period, both government and the private sector.

There have been very loud complaints about how companies pay so much taxes and still have to deal with insecurity. Are you satisfied with how the government is treating local investors?

Insecurity is a major challenge, I can tell you that we lost between 56 to 60% of our members in the North-East to insecurity, they just stopped production. You now look at the cost that you need to incur to be secured, this was something that many years ago was non-existent. We had local communities supporting industries because they are positively impacted but now, there are infiltrations even from outside of the immediate community and the frustration that the people within the community feels has made them to turn the other way and so it increases our cost. I can tell you that some of us pay for security more than the taxes than we pay because it (security expense) has to be a continuous basis. Insecurity is a very serious challenge that we face. Insecurity is a disincentive to manufacturing just like any other business and so government needs to step up activities. There’s no doubt that this current administration is doing a lot. Some of us are aware of what is being done but we need to do more and there’s a sense of urgency in this because we need all that we can muster to be able to get out of this process.

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MAN had predicted that by the second half of the year, we’ll see improvement in terms of our performance because we believe that we would have gone past the stage of adjusting to the reforms and would have seen some growth. We still want to hold on strictly to that outlook and that projection because it is good for us and it’s good for confidence. So, government needs to see that everything is in place including adequate security policies and measures.

There are a number of issues like fuel cost, high electricity tariffs and so on. Do you challenge the government to incentivise the manufacturing sector in the short and long term?

Incidentally, President Bola Tinubu, in the first one month of assuming office, made it clear that he was going to promote domestic production. The manufacturing sector in Nigeria has continued to underperform not because we do not have entrepreneurs that have gone into manufacturing to be able to produce and advance the performance of the sector, but because of the binding constraints that the environment has continued to throw. So, we assumed that when the President made this pronouncement, he was committed to removing those binding constraints. What is just remaining is for us to see his lieutenants (get to work). For the policies that are emanating from government to be consistent with the statements that the President has made. So, if government is committed to that, every statement that the President is going to make will need to be benchmarked against that promise so we wouldn’t have a situation where cost of manufacturing will continue to climb. We won’t have a situation where the fiscal policy and the monetary policies will continue to clash and then limit the performance of the sector. We wouldn’t have things that we don’t expect, we wouldn’t have surprises that will spring up and more or less affect all the progress that we have been making. There’s no doubt that some of these reforms have promoted domestic production but one is at a loss as to how to reconcile it with some of the policies that constrains the sector.

There has been quite a number of reforms that this administration has taken and whether we like it or not, it is the way to go. But then, how do we deal with the fallout activities? That is what is very important. There is no doubt that we needed to float the forex rate, we needed to remove subsidy. But how do we deal with the negative fallout? How do we ensure that businesses survive? That can only happen if you engage effectively, adequately and truthfully with those who operate in that sector for you to get the necessary feedback. You’ll achieve your objective faster with lesser pain and with less adjustment period because everybody needs an adjustment period, both government and the private sector.

There have been very loud complaints about how companies pay so much taxes and still have to deal with insecurity. Are you satisfied with how the government is treating local investors?

Insecurity is a major challenge, I can tell you that we lost between 56 to 60% of our members in the North-East to insecurity, they just stopped production. You now look at the cost that you need to incur to be secured, this was something that many years ago was non-existent. We had local communities supporting industries because they are positively impacted but now, there are infiltrations even from outside of the immediate community and the frustration that the people within the community feels has made them to turn the other way and so it increases our cost. I can tell you that some of us pay for security more than the taxes than we pay because it (security expense) has to be a continuous basis. Insecurity is a very serious challenge that we face. Insecurity is a disincentive to manufacturing just like any other business and so government needs to step up activities. There’s no doubt that this current administration is doing a lot. Some of us are aware of what is being done but we need to do more and there’s a sense of urgency in this because we need all that we can muster to be able to get out of this process.

MAN had predicted that by the second half of the year, we’ll see improvement in terms of our performance because we believe that we would have gone past the stage of adjusting to the reforms and would have seen some growth. We still want to hold on strictly to that outlook and that projection because it is good for us and it’s good for confidence. So, government needs to see that everything is in place including adequate security policies and measures.

Can you give us an example?

For instance, the issue of increase in electricity tariff. We recognise that cost cannot stay the same. We are not necessarily against increase in tariff. Let’s face it, all prices have gone up and those who supply power are business people, so their costs must be going up as well. It is not charity; power is not charity but then there are processes and there should be value for money. We need to follow these processes; we need to get value for money and there has to be engagement as indicated in the law and in the guidelines and in the regulations. You need to follow these processes. If you follow the processes, the DisCos will be able to do business, the manufacturer will be able to do business, the ordinary Nigerian will be able to have power and live a good life. So, it’s not possible for the Discos alone to be the ones that are happy, I must be able to buy power, I must be able to produce, I must be able to be competitive, I must be able to be profitable and I must be able to operate.

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