According to the Centre for the Promotion of Private Enterprise (CPPE), some tax and import duty provisions in the federal government’s 2023 Fiscal Policy measures would significantly harm the economy and exacerbate Nigeria’s de-industrialization concerns.
Dr. Muda Yusuf, CEO of CPPE, stated that the construction and transportation sectors are also vulnerable to fiscal policy-induced downturns.
Some of the measures, he believes, may exacerbate inflationary pressures, which are harmful to economic growth and the manufacturing, construction, and transportation sectors.
“Confronting a regime of high import duties, prohibitive tax rates, and a depreciating currency is a double whammy for economic players.”
“Fiscal policy measures must seek to strike a good balance between revenue generation, boosting domestic production, improving citizens’ welfare, promoting economic growth, deepening economic inclusion, facilitating job creation, and recognizing societal ethos, beliefs, and values,” he emphasized.
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Yusuf noted that the excise duty on beverages, drinks, and wines is based on the value of the product, making the impact even more detrimental to industrialists.
He noted that maintaining current investments in these sectors would be a herculean task, claiming that these policy measures failed to account for the diverse challenges that industry operators are currently facing.
He stated that this will result in a drop in sales for investors in the sector; a negative effect on tax revenue from the sector; a loss of direct and indirect jobs in the millions; millions of farmers supplying local inputs such as grains, as farmers may lose their livelihoods; a risk of decline in profitability and shareholder value; and an increased risk of product smuggling.
On the 40% import duty on vehicles, he stated that it is difficult to justify such a high import duty on vehicles because Nigeria is 90% dependent on road transportation, emphasizing the importance of motor vehicles in the economy.
He also stated that there is an increasing affordability issue for citizens in terms of vehicle acquisition, particularly among the Nigerian middle class.
“The cost of locally assembled vehicles is out of reach for the majority of Nigerians, contrary to the government’s assurance at the start of the auto policy.”
“Nigerians have limited access to credit for vehicle purchases.” Over 90% of purchases are made with cash, which is extremely difficult. And where credit is available, the interest rates are exorbitant, ranging from 25% to 30%.
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“The economy has experienced massive exchange rate depreciation, which has already exacerbated vehicle acquisition costs,” he noted.
“It is thus insensitive of policymakers 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, particularly for the middle class,” he added.
“There is an additional 2% to 4% green tax, depending on the engine capacity of the vehicle.” This equates to an import duty of 42% or 44%, depending on the engine capacity of the vehicle.”
