Manufacturers Association of Nigeria (MAN) has expressed concern over the reported plan by the Nigeria Customs Service (NCS) to re-introduce the four per cent Free-On-Board Levy (FOB), stating that it is a recipe for de-industrialisation.
MAN warned against the inevitable catastrophic effect the reintroduction will have on the manufacturing sector, in particular, and the business community and the people of Nigeria, in general.
It said the manufacturing sector was being stretched beyond its resilience capacity.
In a press release on Tuesday, signed by Director-General of MAN, Mr. Segun Ajayi-Kadir, the association said it viewed the new development as unfortunate and retrogressive, because it had not taken into consideration the affected stakeholders, which, to a large extent, were manufacturers.
Ajayi-Kadir stated, “It is imperative to warn that the Nigerian manufacturing sector is increasingly being burdened beyond its well-known resilience thresholds. The results of our quarterly manufacturers CEO confidence index has continued to show less optimism about the outlook of the sector. De-industrialisation stares us in the face.
“We should not be heading in a different direction when most governments across the world are aggressively promoting their industrialisation agenda and pushing highly nationalist agenda to grow their domestic production.”
He stated that the re-introduction of FOB would be an additional burden to the one per cent Comprehensive Import Supervision Scheme (CISS) fee being paid by manufacturers at a time all government agencies should be seeking ways to de-escalate cost of doing business in Nigeria, as it was being done in other climes and economies.
The MAN director-general said, “It is equally worrisome that this is coming at a time when there is still a looming danger of the unwarranted 15 per cent hike in port charges; our members are struggling with the astronomical increase in the effective import duty calculations rate and contending with unprecedented rise in the cost of energy.
“Already high cost of importation due to the prevailing exchange rate used in calculating the customs duty will further escalate. This is evident in the cost, which had earlier jumped by over 118 per cent, from N2.07 trillion in the first nine months of 2023 to N4.53 trillion in the same period of 2024.”
MAN said it expected that NCS would ultimately rescind the move to introduce the evidently unpopular and ill-timed FOB levy, admonishing that the decision should be put away before it worsens and degenerates into an economic quagmire.
Ajayi-Kadir reiterated that what was needed at this time was the prioritisation of improved trade facilitation that would mitigate the prevailing constraints militating against the optimal performance of the productive sector of the Nigerian economy.
He stated that the FOB levy will cause heavy disruption in the supply chain, trigger raw materials stock-out in many manufacturing concerns, inflict higher cost of demurrage, further increase the huge volume of unsold inventories, and worsen the competitiveness of Nigerian manufacturers.
Ajayi-Kadir stated, “The levy is coming at a time when the headline inflation has hit a historic record of 34.8 per cent in nearly three decades and the majority of Nigerians are struggling. Therefore, the impact on the cost of locally produced items will be instant and far reaching.
“The re-introduction of the levy contradicts the principles of the ongoing Fiscal Policy and Tax Reforms and the spirit behind the tax bills currently being considered by the National Assembly. These efforts are targeted at eliminating multiplicity of taxes and reduction of tax burden for households, manufacturers and other private businesses.
“The re-introduction of the levy is an additional incentive to smuggling, trade diversion, under-declaration of duty and other trade infractions that have bedevilled our country, stretched the capacity of our customs service, and undermined the revenue profile of the country.”
The association further argued that the FOB levy would jeopardise the plan of the federal government to boost forex earnings through non-oil export, as many manufacturing exporters relied on imports for vital inputs and machines that were not available locally.
“The levy will jeopardise our aspiration to be an investment destination of choice and an industrial hub in the West African sub-region,” MAN stressed.
