Manufacturers Association of Nigeria (MAN) has welcomed the six months waiver of Value-added Tax (VAT) on diesel granted by the Federal Government.

VAT Waver On Diesel: Manufacturers Need Long-term Measures To Lower Production Costs

8 months ago
2 mins read

 

Manufacturers Association of Nigeria (MAN) has welcomed the six months waiver of Value-added Tax (VAT) on diesel granted by the Federal Government.

It however, called on the government to adopt long-term measures to address the issue of high energy costs which impacts on their production and cost of goods in the market.

The Federal Government had on Sunday, announced the removal of VAT on diesel for a period of six months as part of measures to address the impact of petroleum subsidy removal in the country. The decision was part of the resolutions reached in a meeting with representatives of labour unions.

The 2021 VAT Modification Order did not exempt Automotive Gasoline Oil (AGO) also known as diesel, from payment of 7.5 per cent VAT.

Oil marketers had in August expressed concerns that the foreign exchange crisis and payment of VAT on diesel had pushed up the cost of the commodity. Currently, a litre of diesel goes for N1,100.

Speaking in an interview on Channels Television Sunrise Daily on Wednesday morning, Director General MAN, Segun Ajay-Kadir, said it’s a good news for manufacturers, adding that they had earlier made such request because due to epileptic power supply in the country, high cost of diesel pushes up manufacturing costs.

Ajayi-Kadir said that given the central role of diesel in powering their businesses, “removing the VAT will help reduce the cost as a production input and cost of transportation for logistics and movement of people generally. It should bring relief to workers and the economy.”

“Diesel to us is like input in the production process because right from the factory where diesel is required to power our machines up to finished product taking them to markets, buying raw materials either imported or locally sourced, diesel is required.

“We have suffered two or three major grid shutdowns, and manufacturers always rely on diesel to power generators. All these are input costs that have negatively affected manufacturing volumes and our cost of production and disrupted logistics.”

The MAN DG however, raised concerns that since the tax waiver on diesel is temporary, the government need to come up with permanent measure to see that the costs of production is reduced significantly.

“We believe that this step is a positive one and at the end of day, we should begin to move beyond the six months, that this should last, to adopt other measures that would generally promote manufacturing and allow the industry contribute to job creation and national wealth.”

Ajayi-Kadir said that with subsidy removal which made price of oil go higher, the government should begin to make effort in revitalizing the economy.

He commended the Federal Government for coming up with the palliatives in form of credit scheme in which N75 billion for 75 big companies and N125 billion for SMEs was proposed, and however, called for expansion of the credit scheme to reach as many as possible.

READ ALSO: FG To Grants 6-Month VAT Exemption On Diesel Amid Fuel Subsidy Talks

According to Ajayi-Kadir, MAN has over 2,500 registered members and more than 70 per cent of them are small and medium scale industries.  He explained that the money is just a drop in the ocean and cannot reach a significant number of them and therefore cannot address the credit crisis in the manufacturing sector.

He said the government should prioritise financing the sector. According to him, high lending interest rate set by the CBN is not helpful and is responsible for poor performance of the manufacturing sector.

He added that foreign manufacturers they compete with have more access to credit.

He further expressed optimism that the Federal Government would come up with more soft credit interventions to boost financing of manufacturing sector, adding that there is need for a more permanent solution to credit granted to manufacturers at rate that is affordable.

“The manufacturing sector is desirous of adequate and effective credit facility,” Ajayi-Kadir stated.

Ajayi-Kadir noted that if the government succeeds in the current finding drive, it would wet appetite for expansion.


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