The Manufacturers Association of Nigeria (MAN) has called upon the government to implement tax relief measures for manufacturers facing declining sales. The Director General of MAN, Segun Ajayi-Kadir, highlighted that manufacturers are currently encumbered by an overwhelming tax load, paying between 60 to 120 different taxes imposed by various levels of government. This complex tax profile drains financial resources, pressing the industry into a precarious position. Ajayi-Kadir is hopeful that governmental action to simplify and reduce the tax regimen to below ten will significantly alleviate the financial stresses faced by manufacturers, allowing them to navigate the current economic challenges more effectively.
Concerns regarding the financial viability of the manufacturing sector are escalating, evidenced by a staggering 42.93% increase in unsold finished goods inventory, which rose to N1.24 trillion in the first half of 2024 from N869.37 billion in the previous year. This inventory surplus indicates a clear disconnect between production capabilities and market demand. Manufacturers worry that such surpluses signal potential downturns in sales and profitability, threatening their operational sustainability. Ajayi-Kadir articulated the industry’s need for strategic government interventions to restore stability and competitiveness, underlining the urgent need for tax modifications that can help balance the fiscal scales.
Amid these challenges, Ajayi-Kadir acknowledged the introduction of a new withholding tax regime as a promising development. This reform is seen as an essential measure that provides much-needed relief to manufacturers and businesses. It particularly favors small and medium-sized enterprises (SMEs), an essential segment of the economy. He emphasized the progressive nature of this reform, as it resonates with the recommendations outlined by the Presidential Committee on Fiscal Policy and Tax Reform, of which he is a member. The recent initiatives underscore a collaborative effort towards rejuvenating the manufacturing sector, paving the way for a more supportive business environment.
One of the most notable components of the tax reform is the exemption of businesses with an annual turnover of less than N50 million from withholding tax obligations. Ajayi-Kadir extolled this exemption as a game-changing initiative for smaller businesses, asserting that lifting this burden will yield positive repercussions not only for manufacturers but for the broader Nigerian economy. By empowering smaller businesses through fiscal relief, the government may foster a more vigorous entrepreneurial landscape that can stimulate job creation and economic growth.
Moreover, Ajayi-Kadir stressed the potential widespread impacts of the newly structured tax system on Nigeria’s economic growth trajectory. The expected reduction in tax burdens on manufacturers is anticipated to create a favorable climate conducive to investment and growth within the sector. As the government seeks to enhance its tax collection mechanisms, a streamlined and less convoluted tax approach could yield a more effective way of boosting revenue without compromising the operational capabilities of businesses. This dual-focus on easing tax burdens while enhancing revenue collection speaks to a balanced approach towards economic policy.
In conclusion, the collective stance of the Manufacturers Association of Nigeria underlines the urgent necessity for government intervention through tax relief measures to sustain the manufacturing sector during times of financial duress. With rising inventory levels reflecting dwindling sales, the need for bold reform is more pressing than ever. The introduction of the new withholding tax regime and its exemptions are viewed as instrumental steps towards revitalizing the sector. As manufacturers look forward to these anticipated changes, there is cautious optimism that the combination of reduced taxation and enhanced policy responsiveness will help catalyze a renaissance in Nigeria’s manufacturing landscape, ultimately benefiting the economy as a whole.
