Business

Report: Nigerian Manufacturers At Receiving End of Country’s Debt Burden

The Manufacturers Association of Nigeria (MAN) has cried out that its members are at the receiving end of Nigeria’s public debts burden of N77 trillion because of government’s indiscriminate imposition of high and multiple taxes on manufacturers in a bid to generate revenue to repay the debts.

The MAN made this assertion in its Manufacturers CEO Confidence Index (MCCI) for Q1 2023 that was captioned, “Special Focus: MAN at the Receiving End of National Debt Crisis,” which stated that “higher debt repayment requires increased revenue. The Nigerian government has continued to breed a harsh business environment by its indiscriminate imposition of high and multiple taxes on manufacturers all in a bid to generate revenue.”

The report also stated that the government was using the country’s debt crisis to impose anti-growth manufacturing taxes in its bid to curb the debt problem, arguing that this has put the manufacturing sector always at the receiving end in spite of the fact that the borrowed money was not invested in areas that would have positive impact on the performance of the manufacturing sector.

It added that, “a whooping debt service-to-revenue ratio of over 100 percent may spell doom for the new administration leaving it to continue the borrowing spree or incapacitated to provide critical infrastructure needed to boost the manufacturing sector and kick start the recovery of the economy.”
The report, which was released on Zunday, also showed that the Aggregate Index Score (AIS) of the MCCI declined to 54.1 points in the first quarter of 2023 from 55.0 points it recorded in the fourth quarter of 2022.

The report noted that the, “domino effects of escalating public debt on the manufacturing sector are endless. To start with, rising domestic debt is highly crowding out private investment in the manufacturing sector by reducing credit availability and forcing hike in lending rates.”

It also pointed out that the cost of servicing external debts in foreign currencies was contributing significantly to high demand for foreign currencies thereby worsening the depreciation of the naira and, “makes importation of non-locally produced critical inputs highly expensive for manufacturers.”
It further stated, that “higher debt servicing is consuming greater volume of foreign exchange and worsening the foreign exchange scarcity that has plagued the manufacturing sector for many years.

“Huge public debt led to low foreign investment and foreign capital inflow which worsen the foreign exchange (FX) scarcity that has remained a bone in the throat of manufactures. As public debt continues to grow unsustainably, it becomes increasingly difficult to cover salary payments and other recurrent expenditure in the civil service. The implication is more borrowing for government consumption on recurrent expenditure and less on infrastructure and other capital projects meant to boost manufacturing sector performance.”

The MAN also claimed that Nigeria’s real problem is not revenue generation or collection but the siphoning of collected revenue so that they do not reflect in the records.

“Contrary to popular believe, exorbitant taxes are also collected in the informal sector of the economy without adequate remittance into state coffers,” the report added.
MAN noted that debt worth of N77 trillion was an enormous burden to inherit and would most likely limit the achievements of the new administration unless the following recommendations are implemented.

The recommendation included widening the tax net through an enhanced data capture of business operators in the informal sector; strict implementation of the Voluntary Assets and Income Declaration Scheme (VAIDS) through the Federal Inland Revenue Service (FIRS) and further identification and amendments of the loopholes in the tax laws in order to reduce the leakage of tax revenues.

The recommendation also tasked the federal government on promoting, “fiscal discipline by reducing the cost of governance and strictly complying with Section 41 of the Fiscal Responsibility Act and section 38 (sub-section 2) of the CBN Act.

“Ensure the rehabilitation of local refineries and remove the humongous annual subsidy in phases while ensuring they are backed with appropriate palliatives for households and businesses.

“Ensure proactive judicial investigation into allegations of oil theft and stamp duty fraud.
“Embark on mechanisms that promote coordination and confidence among creditors in order to be granted opportunity for debt restructuring.”
It also enjoined the government to “prioritise debt management and transparency to control risks and reduce the need for restructuring, which stands to benefit both debtors and creditors

“Ensure proper management of capital and recurrent expenditure by determining the appropriate spending priorities that reflect the yearnings and aspirations of households and businesses within the limits of available resources.

“Establish incorruptible monitoring teams tasked to ensure effective budget implementation and detailed evaluation of budget performance.
“Set up a special court and reinvigorate the anti-graft agencies like the Economic and Financial crime Commission (EFCC), and the Independent Corrupt Practices Commission (ICPC) in order to strengthen the fight against corruption.

“Promote transparency and productivity in government expenditure by ensuring public funds are expended on feasible development projects in order to minimise wastage.

“Optimise the capability of the states to generate internal revenue given the abundant natural and human resources.
“Diversify the country’s revenue base by boosting critical sectors like manufacturing, agriculture, entertainment, tourism and ICT.”

Dike Onwuamaeze