The Manufacturers Association of Nigeria (MAN) has signaled concerns that the estimated N77 trillion debt burden faced by Nigeria could impede the economic plans of the current administration led by President Tinubu.
The manufacturers also lamented the adverse effects of Nigeria’s escalating debt crisis, which has witnessed a staggering 410 percent surge in the nation’s debt profile over the past eight years.
Consequentially, the aggregate Manufacturers CEO’s Confidence Index (MCCI) of the Manufacturers Association of Nigeria (MAN) in Nigeria’s economy has dropped to 54.1 points in Q1 of 2023 from 55.0 points in the previous quarter.
According to the MAN CEOs’ Confidence Index (MCCI) report for the first quarter of 2023 (Q1’23), recently released by the association, the implications of mounting public debt on the manufacturing sector are far-reaching.
“To start with, rising domestic debt is highly crowding out private investment in the manufacturing sector by reducing credit availability and forcing hike in lending rates.
“External debts are mostly serviced in foreign currencies, hence high demand for foreign currencies further depreciates the naira and makes importation of non-locally produced critical inputs highly expensive for manufacturers.
“Moreover, higher debt servicing is consuming greater volume of forex and worsening the forex scarcity that has plagued the manufacturing sector for many years. Higher debt repayment requires increased revenue.
“The Nigerian government has continued to breed a harsh business environment by its indiscriminate imposition of high and multiple taxes on manufacturers all in a bid to generate revenue.
“Huge public debt led to low foreign investment and foreign capital inflow which worsen the forex scarcity that has remained a bone in the throat of manufactures.”
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MAN further said: “Contrary to the popular parlance in the government quarters that Nigeria has revenue problem, the country’s debt crisis is not a result of inadequate revenue and it is anti-growth to view manufacturing taxes as the last resort for curbing the debt problem.
“The manufacturing sector which has always been at the receiving end has not felt any significant impact of the debt finance on the numerous challenges that have bedeviled its performance in many years. Infrastructure decadence, forex scarcity, credit crunch and naira depreciation have become bones in the throats of MAN members despite the humongous increase of over 410% in the country’s debt profile in the last eight years.
“Amidst multiple taxes, Nigeria’s real problem is not revenue generation or collection but the siphonage of collected revenue so that they do not reflect in the records.”
According to the report, “MAN is of the view that debt worth of N77 trillion is an enormous burden to inherit and will most likely limit the achievements of the new administration”.
In light of these concerns, MAN recommended implementation of the following, among others: “Increase the revenue base by widening the tax net through an enhanced data capture of business operators in the informal sector.
“Strictly implement the Voluntary Assets and Income Declaration Scheme (VAIDS) through the Federal Inland Revenue Service (FIRS).
“Further identify and amend the loopholes in the tax laws in order to reduce the leakage of tax revenues.
“Promote fiscal discipline by reducing the cost of governance and strictly complying with section 41 of the Fiscal Responsibility Act and section 38 (sub-section 2) of the CBN Act.”