According to the Centre for the Promotion of Private Enterprise (CPPE), certain tax and import duty provisions included in the 2023 Fiscal Policy measures proposed by the federal government would deal a significant blow to the economy and exacerbate existing concerns regarding the de-industrialization of the Nigerian economy.
According to Dr. Muda Yusuf, the CEO of CPPE, who stated that the construction and transportation sectors are also susceptible to the adverse effects of fiscal policy-induced risks.
According to him, some of the measures could lead to an increase in inflationary pressures, which would be detrimental to economic growth as well as the construction, manufacturing, and transportation sectors.
“It is a double whammy for economic players to have to contend with a regime of high import duty and prohibitive tax rates while simultaneously contending with a currency that is depreciating.
“Fiscal policy measures must seek to ensure a good balance between objectives of revenue generation, boosting domestic production, enhancing the welfare of citizens, promoting economic growth, deepening economic inclusion, facilitating job creation, and recognizing societal ethos, beliefs, and values,” he emphasized. “Fiscal policy measures must seek to ensure a good balance between objectives of revenue generation, boosting domestic production, enhancing the welfare of citizens, and promoting economic growth.”
Yusuf pointed out that the ad-valorem tax on beverages, drinks, and wines is calculated according to the value of the product, which makes the impact even more detrimental to industrialists.
He made the observation that maintaining current investments in these industries would be a herculean task, saying that these policy measures failed to take into account the myriad of challenges that industry operators are currently attempting to overcome.
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He stated that this will result in a decrease in sales for investors in the sector; a negative effect on tax revenue from the sector; the loss of direct and indirect jobs, the number of which could be in a couple of millions; the potential for millions of farmers who supply local inputs such as grains to lose their livelihoods; the risk of a decline in profitability and shareholder value; and an increased risk of smuggling of the products.
Regarding the forty percent import duty on vehicles, he stated that it is difficult to justify such a high import duty on vehicles as Nigeria is approximately ninety percent dependent on road transportation, which highlights the significance of motor vehicles to the economy. He also stated that this high import duty on vehicles is difficult to justify.
He went on to say that there is an increasing affordability problem for citizens in regards to the acquisition of vehicles, particularly among the middle class of Nigerian society.
“Contrary to the assurance given by the government at the beginning of the auto policy, the cost of locally assembled vehicles is well beyond the reach of the majority of Nigerians.
“Nigerians have a restricted amount of access to credit, which makes it difficult for them to purchase vehicles. The fact that more than ninety percent of transactions are conducted with cash presents a significant challenge. And even in the few instances where credit is available, exorbitant interest rates of between 25 and 30 percent are charged.
“The economy has experienced huge exchange rate depreciation, which had already exacerbated vehicle acquisition costs in the first place,” he mentioned, pointing out that this was a problem. ”
He continued by saying that “it is therefore insensitive of policymakers to impose a whopping 40 percent import duty on vehicles in an economy where there is no mass transit system and where vehicle ownership has become a necessity, especially for the middle class.”
“There is an additional green tax of between two and four percent, and it varies based on the horsepower of the vehicle’s engine. Depending on the horsepower of the vehicle’s engine, this translates to an import duty of either 42% or 44%.
