The Manufacturers Association of Nigeria (MAN) has decried the reported plans by the Nigeria Customs Service (NCS) to re-introduce the 4.0 per cent Free-on-Board Levy (FOB).
It said that such action will accelerate the de-industrialisation of Nigeria’s economy.
It also cautioned against ”the inevitable catastrophic impact it will have on the manufacturing sector in particular, and the business community and the people of Nigeria in general.”
A press release titled “MAN Raises Alarm Over the Planned Re-introduction of 4.0 Per Cent FOB Levy by NCS,” which was issued on Tuesday by the Director General of MAN, Mr. Segun Ajayi-Kadir, said that MAN viewed the new development as unfortunate and retrogressive.
Ajayi-Kadir said that “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 noted that the r-introduction of the FOB would be an additional burden to the 1.0 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 is being done in other climes and economies.
He added: “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.”
According to him, the “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 ₦2.07 trillion in the first nine months of 2023 to ₦4.53trillion in the same period of 2024.”
MAN, therefore, expected that the NCS would ultimately rescind the move to introduce the evidently unpopular and ill-timed FOB levy.
“We admonish that the decision should be put away before it worsens and degenerates into an economic quagmire.”
Ajayi-Kadir reiterated that what is needed at this time is the prioritisation of improved trade facilitation that would mitigate the prevailing constraints militating against the optimum performance of the productive sector of Nigerian economy.
MAN argued that the FOB levy “will cause heavy disruption in 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.”
It added that “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 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 has bedeviled 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 rely on imports for vital inputs and machines that are 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.”
It, therefore, implored the government to urgently direct the NCS to jettison the idea of the re-introduction of the 4.0 per cent Free-on-Board Levy.
