Fakoyejo OlalekanThe Manufacturers Association of Nigeria (MAN) said the high taxes imposed on the sector is the Federal Government’s attempt to shift the responsibility of repaying FG’s debt to manufacturers.
According to the first quarter (Q1) Manufacturers CEO Confidence Index (MCCI), the government is trying to use the manufacturers to repay its external and domestic debt.
FG’s debt has skyrocketed to about N70 trillion, which consists of external and domestic debt, as well as the ways and means advances extended to the government by the Central Bank of Nigeria (CBN).
The manufacturers said they are at the receiving end of the government’s drive to repay its debt through taxation. MAN revealed that this is affecting private sector investment in the manufacturing sector.
MAN explained that the government’s drive to drastically increase revenue has led to the imposition of high taxes, which is frustrating investments and burdening their revenue.
“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,” the report reads.
In its explanation, MAN affirmed that the external debt is also affecting the manufacturing sector, as repayment of foreign loans increases demands for foreign exchange, thereby, making the cost of importation of non-locally produced critical inputs skyrocket.
The association noted that the increase in demand for forex to repay the external debt will worsen the scarcity of foreign exchange and continue to weaken the naira in the process.
The MAN report reads “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 manufacturers.
“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 association added.
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