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The Director General of Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir has listed the possible economic realities and effect of likely hike in taxes, saying “In terms of misery index rating, low per capita income, heavily lopsided income distribution pattern, the Nigerian economy will be in a more vulnerable state if VAT is increased”.
MAN, who called for immediate harmonization of all taxes/levies/fees payable by businesses in the country with the aim of attracting more investment that would translate to higher productivity and more tax revenue for the Government in the medium and long term, said lopsided income pattern is likely to cause serious issues.
Ajayi-Kadir said “No controversy, the burden of the tax would be shifted to the Nigerian consumers that are already struggling, the economy would certainly experience demand crunch, inventory of unsold items would soar, profitability of manufacturing concerns would be negatively impacted, many factories will witness serious downturn or wind down operations.
“This would also worsen the already high unemployment position of the country which is above 23% as Nigerians currently employed by manufacturing concerns and other businesses may join the reserved army of unemployed and further bloat the unemployment rate in the country”.
“Otherwise it could boomerang, leading to crowding out of businesses; more misery to the citizens and even lesser revenue to the Government,” DG of MAN noted.
He argued further that “Specifically, the local producers identified the resultant effects of implementing an increased VAT on the manufacturing sector to include slower purchasing power of consumers, sharp reduction in consumption, drop in sales, decrease in production capacity, lower Government revenue, increase in unemployment and stifled economic growth”.
However, in all these, MAN had been calling for the widening of tax net rather than increasing the rate to meet the growing need for more revenue to address the development objective of the country even as the Federal Government had promised to review and harmonise levies across board.
Recently, the Business Expectations Survey released by the Central Bank of Nigeria (CBN) showed that respondent firms identified insufficient power supply (63.3 points), high interest rate (55.2 points), unfavourable economic climate (55.2 points), financial problems (53.0 points), unfavourable political climate (51.8 points), unclear economic laws (48.9 points), insufficient demand (42.4 points) and access to credit (41.4 points) as the major factors constraining business activity last month.
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