CPPE Raises Red Flag on 2023 Fiscal Policy
By Rosemary Iwuala
The Centre for the Promotion of Private Enterprises (CPPE) says some tax and import duty provisions in the 2023 Fiscal Policy Measures of the Federal Government would crucially affect the economy and worsen the de-industrialisation worries in the Nigerian economy.
It also stated that the construction and transportation sectors are vulnerable to fiscal policy induced downside risks and that some of the measures could exacerbate inflationary pressures which are detrimental to economic growth and manufacturing, construction and transportation sectors.
Muda Yusuf, Founder, CPPE, in a statement said, “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, deepening economic inclusion, facilitating job creation and recognising societal ethics, beliefs and values.”
BUSINESS METRICS observes that specific reviews of the new fiscal policies include excise duty on beverages and wines, import duty on vehicles, import duty on Iron and Steel products, tobacco industry and others.
According to the excise duty on beverages and wines, the fiscal policy measures imposed the following rates: Non-Alcoholic beverages, fruit juice, energy drink excise: Duty of N10 per litre; Beer and stout: 20 per cent; Ad valorem Tax; N75/Litre, Wine Production: 30 per cent Ad Valorem; N75/litre, Spirit and other Alcoholic beverages: 30 per cent Ad Valorem; N50/litre.
Yusuf said, “It should be noted that Ad valorem tax is based on the value of the product, which makes the impact even more injurious to industrialists and sustaining current investments in these sectors would be a herculean task.
“These policy measures had failed to reckon with the multifarious challenges which industry operators are currently grappling with, some of which include high energy cost, downside risk to manufacturing sector outlook in the Nigerian economy and weak and declining consumer purchasing powers.,” he added.
According to the statement, the implications for the sector and the economy includes drop in sales, loss of direct and indirect jobs, risk of decline in profitability and shareholder value and elevated risk of smuggling products.
Addressing the 40 per cent import duty on vehicles, Yusuf said it was difficult to justify the high import duty on vehicles, stating that there was already an increasing affordability problem for citizens with regard to vehicle acquisition, especially by the middle class of the Nigerian society and that the cost of locally assembled vehicles are beyond the reach of most Nigerians, contrary to the assurance given by the government at the inception of the auto policy.
He also said that the economy has experienced huge exchange rate depreciation which had already exacerbated vehicle acquisition cost in the first place, so it is therefore insensitive of policy makers to impose a whooping 40% import duty on vehicles in an economy where there is no mass transit system.
The statement also disclosed the implications of the policy on the economy and the citizens which includes high transportation cost, risk of increased smuggling, high number of rickety vehicles, especially commercial buses and the middle class which continues to contend with affordability problems.
The CPPE boss stressed the documentary over the import duty of 45 per cent on iron and steel products, saying, “the country is currently contending with high cost of construction of both public and private properties and that the Infrastructure costs have also become very exorbitant and housing deficit is still very high, therefore, it is difficult to justify this high import duty on a major input of the construction industry.”
Yusuf who disclosed the reviews of the tax on tobacco industry, said that there are two main issues with the tobacco sub sector which pose a policy dilemma. There is the morality of tobacco production, and there is the economics of it.
“There is consensus that smoking is dangerous to health and the companies who are producing it are already mandated to inscribe this on their product packages.
“Advertisements of tobacco products are already outlawed in Nigeria, and smoking in public places is prohibited by law. In order to continue to take steps to discourage smoking, we should avoid extreme measures which may put the industry at the risk of extermination,” he said.