Nigerian Manufacturers Say 335 Companies Became Distressed, 767 Shut Down in 2023

As controversy trails the newly introduced Expatriate Employment Levy (EEL) of $10,000 and $15,000 for staff and directors, respectively, the Manufacturers Association of Nigeria (MAN) has revealed that 335 manufacturing companies became distressed while 767 shut down in 2023.

MAN warned that the EEL would certainly ruin the confidence President Bola Ahmed Tinubu was striving to build among domestic and foreign investors.

The views were contained in a statement issued on Tuesday by Director-General of MAN, Segun Ajayi-Kadir, titled, “MAN Expresses Grave Concerns over the Expatriate Employment Levy.”

It described the latest levy as “punitive levy,” which was already “being perceived as a punishment imposed on investors for daring to invest in Nigeria and on indigenous companies for employing needed foreign nationals”.

The statement said EEL “is potentially an albatross to the realisation of Mr. President’s private sector led economy aspirations and would certainly ruin the trust and confidence he is striving hard to build among domestic and foreign private investors”.

Ajayi-Kadir added, “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 policy will surely undermine the administration’s determination to position Nigeria as an attractive global investment destination and may engender a cold welcome in Mr. President’s future foreign investment promotions endeavours, as well as undermine Nigeria’s efforts at becoming a hub for shared services centre and business process outsourcing.”

According to the statement, “The manufacturing sector is already beset with multidimensional challenges. In year 2023, 335 manufacturing companies became distressed and 767 shut down.

“The capacity utilisation in the sector has declined to 56 per cent; interest rate is effectively above 30 per cent; foreign exchange to import raw materials and production machine inventory of unsold finished products has increased to N350 billion and the real growth dropped to 2.4 per cent.

“Expatriates in Nigeria currently pay more than $2000 for CERPAC. The sector cannot afford another disincentive to increased investment and portfolio expansion.”

MAN stated that the levy would deter multinational companies from investing in Nigeria and setting up their regional headquarters in the country.

“Also, the levy will make Nigeria a more expensive location for global expertise that international companies require for their operations,” it stated.

“Overall, we risk slowing down knowledge and skills transfer to Nigerians and undermining a key avenue for the country to move up the technology ladder,” MAN added.

The manufacturers’ association was equally worried that the imposition of such a levy, which could have far-reaching implications for the country’s economy and potentially exert pressure on Nigeria’s currency, was introduced through a handbook, rather than a law enacted by the National Assembly.

MAN warned, “This levy may expose the federal government to a plethora of lawsuits that will distract government from the task of salvaging the current dire situation of our economy.

“Additionally, we already have laws that were promulgated to achieve the exact purpose for which the EEL was introduced. They include the Local Content Act, which guarantees the jobs of Nigerians, and the Immigration Act, which prescribes the primacy of consideration for Nigerians and imposes appropriate quota in the engagement of expatriate.

“Therefore, the EEL would amount to duplication and burdensome addition.”

MAN also expressed concern that EEL would contradict Nigeria’s international trade agreements and the obligations contained therein.

It stated, “For instance, Nigeria is a signatory to the African Continental Free Trade Area (AfCFTA) agreement. One of the pillars of the AfCFTA is the free movement of skilled labour across the continent, which is complemented by non-discriminatory measures against fellow Africans.

“Quite importantly, this could trigger retaliatory measures against Nigerians working across Africa and other nations of the world; frustrate regional integration efforts and portray Nigeria as a spoiler among her peers.”

The association, therefore, asked the president to give due consideration to its arguments and direct that the implementation of EEL be discontinued.

According to MAN, discontinuing the policy would be in the overall interest of the country’s economy and is urgently needed to reassure domestic and foreign investors of Nigeria’s commitment to an investment friendly environment and ease of doing business.

“Additionally, Mr. President should direct the Nigeria Immigration Service to refrain from enforcing compliance with the policy,” MAN said.

Ajayi-Kadir stated that while MAN fully supported policies aimed at promoting quality job opportunities for Nigerians, it would urge the president to consider the wider negative effect of EEL.

He stated, “A more effective and sustainable approach is for government to intentionally improve on its human capital development and incentivise companies to invest in developing local talent without compromising Nigeria’s ability to attract Foreign Direct Investment (FDI).

“MAN advises that it is extremely important that government institutionalise stakeholders’ consultations and engagement before important policies that could have far-reaching implications for our economy are made.

“This will allow for constructive input from the business community, who are able to support government initiatives and are the most impacted by the outcomes.”

 Dike Onwuamaeze

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