In this interview with EDIDIONG IKPOTO, the President of the Manufacturers Association of Nigeria, Francis Meshioye, talks about how manufacturing companies are affected by higher energy costs. among other issues
President Bola Tinubu recently signed an executive order for the suspension of the implementation of some new taxes contained in the Finance Act. What is the reaction of the manufacturing community to this?
In the first instance, I want to thank the President, Bola Tinubu, for this laudable step. It is laudable. I want to believe that the President has listening ears and is willing to support the masses and the development of the manufacturing industry in Nigeria, which is contributing to the growth of the economy. I want to salute him for his courage and willingness to see that things are done rightly.
He has said that the Act will not take effect until September, thereby, giving the necessary notification to all concerned. This is very good. It means that he is conscious of the regulations that were signed in 2017 that at any point in time, there would be a 90-day notice so that those concerned can get ready for the implementation of whatever expected change. Kudos to him on this.
After this, I’m trying to understand what was said by Dele Alake. He mentioned the Customs and Excise tariff as it affects tobacco products and alcoholic beverages as well as the one that involves single-use plastics. I thank the President because the green tax has been suspended. We spoke with the past administration that this should not come into effect. For the President to listen and say that he understands the plight of the manufacturers. This means that he has Nigerians in mind. This is very good.
The second one is the excise tax increase on alcoholic beverages and tobacco products. It is not clear whether this has been suspended. It was mentioned by Alake that the President was conscious of this, but he did clarify whether this would be suspended. Our prayer has been that this should be totally suspended.
In this first instance, there was a road map on how the increase will come to play. We have the confidence of the previous administration that they will respect the road map as agreed upon, but all of a sudden, we find that this is not the case; that the Finance Act introduced an increase. This is very astonishing to us. We plead that if this part of what is being suspended by this Executive Order, we want it to be very clear so that our members will not have any problems in compliance and that there would be no threats from any other government agencies, especially Customs. If otherwise, I want to use this medium to plead with the President to suspend it totally because the road map stipulates a gradual increase in excise duty.
What is your plea to the government in this regard?
What I want the President to do is evaluate the impact of the increase already meted, which has been passed on to the consumers. How are they reacting to it? What does it mean to them? This is our plea to the President. He should engage the stakeholders. We are willing to dialogue with the administration and see how we can support the economy without jeopardising the interest of the manufacturers.
The real sector is very important in growing the economy. They are the major employers of labour besides agriculture. If we have growth in the manufacturing sector, the dependence on imported products will be minimised. This means that the forex, which is very expensive to come by, will be saved. It will not be too much to look into the manufacturing sector to evaluate the impact of all that has been said in the past 24 months to see whether to continue with it, or suspend it totally. That would be my plea to the President.
I want to re-emphasise that manufacturers appreciate the steps taken to suspend the tax on plastics. We plead with him to not only do that but to see that the tax on tobacco and non-alcoholic beverages is suspended as well.
In an earlier interview, you said that more multinational manufacturers are planning to leave Nigeria due to increasing energy costs. What do you think the government can do to ease the burden of energy costs on manufacturers?
It is quite a paradox. It is a bit awkward. If we need electricity here, why do we need to export it? Why don’t we ensure that we have an adequate electricity supply at home? We rejected the hike in electricity tariff because, in the first instance, energy costs are very high for manufacturers, particularly those who consume much, like steel manufacturers. It takes an average of 35 to 40 per cent of their total costs. Any increase in electricity tariff makes it harder on us. The harder it is, the harder it will be for consumers. When this is so, it means that the demand for products will drop. As I said in my previous interview, the profit margin will be low.
The tax that you will have on this margin will be low as well. So, the government will also lose. One thing that I emphasise is that there is a lack of efficiency on the part of the DisCos. They are unable to collect all the money for their supplies. They rely on estimated billing in some cases. This is not good. You cannot tell people that you don’t mind how you collect your money. What they need to do is ensure that all electricity users are metered. It is then that they can say that they know how to get their money. They can now make a case to increase their tariff. If that is not done, the increase is not based on an informed decision. The data that they are using is inaccurate. So, the decision will be inaccurate.
The first thing they need to do is ensure that there is an efficient collection of revenue. We need to concentrate and ensure that locally, we have a supply of electricity to all industries and households. My personal view is that it is when you satisfy the domestic front, then, you can now satisfy others. Let’s look at the petrol subsidy that was removed recently. I understand that there was a way to get PMS across the border illegally. You find that this is now difficult because the price locally and over there is very close. This is good because it deters people from taking the petrol that we need here across the border and has a shortage. With electricity, we should first satisfy our domestic needs before we start to service our neighbours. This is my personal view and I believe this will be the view of other prudent people.
Now that the exchange rate has been unified, the naira seems to be struggling at the moment. Economists have said that for the naira to appreciate, we must boost local production and export more. What are you saying to your members who are exporters in terms of boosting manufacturing activities?
We will tell our members to do more, but all these things are based on competitive advantages. If you want to export a product, it is fine, but at what cost are you going to export it? What will be your price? If the cost is astronomically high, it will be difficult to export. It is a circle. Of course, the export base should be good enough to support the floating exchange rate, but we need to have a good economic base to do that.
Yes, we encourage our members to continue to export, but it is necessary to emphasise that the government needs to look at why manufacturers cannot export as expected. They can call manufacturers to a roundtable. They can look at those products that can generate money, and ask what the impediments to exports are. That would be fantastic. We need to boost our export base. It should be robust. The more we export, the more forex we earn. And the more forex we earn, the more we have to source our importation needs.
We encourage our members to export more. But we plead with the government to make and implement policies that will motivate and stimulate manufacturing. If we stimulate investments in manufacturing, we will definitely churn out more products. So, these products will find their way out of Nigeria legally, and we will get forex to defend the naira.