Post by Trade facilitator on May 21, 2023 0:40:09 GMT 1
Following Federal Government’s decision to retain excise duty payment on the brewery sector, according to a recently released 2023 Fiscal Policy Measures, the Manufacturers Association of Nigeria (MAN) has called for the suspension of the policy in order to foster stability in the affected sectors and their value chain. In particular, MAN says that government cannot impose the policy on the country’s manufacturing sector that is in acute recession as first quarter (Q1) of 2023 results have shown a massive decline of -169 per cent in profit before tax (PBT) for the brewing sector, industry turnover for non- alcoholic beverages and tobacco declining by -15 per cent, while gross profit and profit before tax declined by -31 percent and -96 per cent within the same period, respectively.
The association, in addition, pointed out that the tobacco sector had actively began to reduce its export production from Nigeria as it has over N39 billion plus trapped in Export Expansion Grant (EEG) incentive not yet released to it by the Federal Government to manage its operations. The President of MAN, Otunba Francis Meshioye, made this known in a prepared paper on the increase in excise rates for alcoholic beverages and tobacco, as contained in the 2023 policy measures cited by New Telegraph.
He said that the country’s manufacturing sector was wobbling in acute recession at the moment and that the increase on June 1 was coming at a time the manufacturing sector is immersed in unprecedented crisis and an acute recession, due to extraordinary challenges, namely: sustained scarcity of naira (which has led to a crash in consumer purchases), limited access to foreign exchange (which has led industry to purchase foreign exchange from the parallel market, thereby increasing costs); record inflation (which further drive-up cost of operation and prices of products) and a struggling economy.
Meshioye explained that the naira scarcity and limited access to foreign exchange had exacerbated the continued impact of systemic challenges such as high cost of operations, multiplicity of taxes, limited electric power supply and infrastructural challenges. According to him, for instance, the Nigerian manufacturing sector recorded a 36 per cent downturn in profit margins from 2021 to 2022 and over 400 per cent increase in energy costs, further constraining growth of the sector. Thus, this is not the time to impose additional increases in excise duty on the country’s manufacturing sector.
He said: “On the 2nd of May 2023, the Manufacturers Association of Nigeria (MAN) issued a press statement in reaction to the recently released 2023 Fiscal Policy Measures (FPM) by the Federal Ministry of Finance, Budget and National Planning. “In that press release, MAN raised significant concerns about the provisions of the 2023 FPM, including the excessive increase in excise on beverages and tobacco and the introduction of a tax on Single Use Plastics (SUP), amongst others.
“MAN would like to use this opportunity to elaborate on its concerns with the exorbitant increase in excise on beverages and tobacco and reiterate its position on the Single Use Plastics tax.” The MAN president emphasised that the rate of excise increase was exceptionally excessive, adding that the rate was not consistent with best practice globally. “For instance, the excise for beer was effectively increased by about 200 per cent, translating to a tripling of excise on the product.
This is coming against the backdrop of the huge tax burden on the tobacco and beverage sectors, with the tobacco industry being taxed five times more than the average for other industries,” he lamented. Speaking on the background to the Federal Government’s excise duty introduction, the renowned industrialist stated that government initiated a three-year excise roadmap in 2018, after extensive consultation with the industry, and the roadmap ran successfully until its conclusion in 2021, without any change or issues. According to him, this enabled the industry to successfully plan its operations, given the certainty in excise.
The philanthropist added that in 2021, the government retained the excise rates for 2020/21 up until May 2022, while it utilised the one-year period to engage extensively with industry to decide on a revised roadmap. He said: “Following this engagement, the government released the 2022 fiscal policy with a revised three-year excise road- map, which, though providing for higher excise rates, still took into consideration the potential impact on the industry.
“Barely five months into the implementation of the 2022 excise roadmap, the industry became apprised of plans by the government to further increase excise rates. “Industry engaged with the Federal Government and by the end of 2022, had the informal understanding from these engagements that the excise rates for 2022/23 would be retained for 2023/24.
“This understanding was further confirmed at a meeting held between the Manufacturers Association of Nigeria (MAN) and the Honourable Minister of Finance, Budget and National Planning, which held on 29th March 2023. “At that meeting, the Honourable Minister assured representatives of MAN that there would be no increase beyond the pre- scheduled increase for 2023, as contained in the 2022 roadmap.
“In effect, the excise increases in the 2023 FPM are ‘an increase on an increase’, since there was already an approved increase for 2023. Issues with the excise increase as contained in the 2023 FPM.”
Source: newtelegraphng.com/man-to-fg-suspend-excise-duty-on-brewing-sector/
The association, in addition, pointed out that the tobacco sector had actively began to reduce its export production from Nigeria as it has over N39 billion plus trapped in Export Expansion Grant (EEG) incentive not yet released to it by the Federal Government to manage its operations. The President of MAN, Otunba Francis Meshioye, made this known in a prepared paper on the increase in excise rates for alcoholic beverages and tobacco, as contained in the 2023 policy measures cited by New Telegraph.
He said that the country’s manufacturing sector was wobbling in acute recession at the moment and that the increase on June 1 was coming at a time the manufacturing sector is immersed in unprecedented crisis and an acute recession, due to extraordinary challenges, namely: sustained scarcity of naira (which has led to a crash in consumer purchases), limited access to foreign exchange (which has led industry to purchase foreign exchange from the parallel market, thereby increasing costs); record inflation (which further drive-up cost of operation and prices of products) and a struggling economy.
Meshioye explained that the naira scarcity and limited access to foreign exchange had exacerbated the continued impact of systemic challenges such as high cost of operations, multiplicity of taxes, limited electric power supply and infrastructural challenges. According to him, for instance, the Nigerian manufacturing sector recorded a 36 per cent downturn in profit margins from 2021 to 2022 and over 400 per cent increase in energy costs, further constraining growth of the sector. Thus, this is not the time to impose additional increases in excise duty on the country’s manufacturing sector.
He said: “On the 2nd of May 2023, the Manufacturers Association of Nigeria (MAN) issued a press statement in reaction to the recently released 2023 Fiscal Policy Measures (FPM) by the Federal Ministry of Finance, Budget and National Planning. “In that press release, MAN raised significant concerns about the provisions of the 2023 FPM, including the excessive increase in excise on beverages and tobacco and the introduction of a tax on Single Use Plastics (SUP), amongst others.
“MAN would like to use this opportunity to elaborate on its concerns with the exorbitant increase in excise on beverages and tobacco and reiterate its position on the Single Use Plastics tax.” The MAN president emphasised that the rate of excise increase was exceptionally excessive, adding that the rate was not consistent with best practice globally. “For instance, the excise for beer was effectively increased by about 200 per cent, translating to a tripling of excise on the product.
This is coming against the backdrop of the huge tax burden on the tobacco and beverage sectors, with the tobacco industry being taxed five times more than the average for other industries,” he lamented. Speaking on the background to the Federal Government’s excise duty introduction, the renowned industrialist stated that government initiated a three-year excise roadmap in 2018, after extensive consultation with the industry, and the roadmap ran successfully until its conclusion in 2021, without any change or issues. According to him, this enabled the industry to successfully plan its operations, given the certainty in excise.
The philanthropist added that in 2021, the government retained the excise rates for 2020/21 up until May 2022, while it utilised the one-year period to engage extensively with industry to decide on a revised roadmap. He said: “Following this engagement, the government released the 2022 fiscal policy with a revised three-year excise road- map, which, though providing for higher excise rates, still took into consideration the potential impact on the industry.
“Barely five months into the implementation of the 2022 excise roadmap, the industry became apprised of plans by the government to further increase excise rates. “Industry engaged with the Federal Government and by the end of 2022, had the informal understanding from these engagements that the excise rates for 2022/23 would be retained for 2023/24.
“This understanding was further confirmed at a meeting held between the Manufacturers Association of Nigeria (MAN) and the Honourable Minister of Finance, Budget and National Planning, which held on 29th March 2023. “At that meeting, the Honourable Minister assured representatives of MAN that there would be no increase beyond the pre- scheduled increase for 2023, as contained in the 2022 roadmap.
“In effect, the excise increases in the 2023 FPM are ‘an increase on an increase’, since there was already an approved increase for 2023. Issues with the excise increase as contained in the 2023 FPM.”
Source: newtelegraphng.com/man-to-fg-suspend-excise-duty-on-brewing-sector/
