The Manufacturers Association of Nigeria (MAN) has said that 767 manufacturers shut down operations while 335 became distressed in 2023.
This occurred amidst exchange rate fluctuations, escalating inflation, and other economic hurdles that have exacerbated the investment environment.
The Manufacturers Association of Nigeria (MAN) conveyed this stance in a press release, denouncing the recently implemented Expatriate Employment Levy by the Federal Government.
Expressing disbelief, the association highlighted that the levy contradicts President Bola Tinubu’s Renewed Hope Agenda and the core principles of his Fiscal Policy and Tax Reform initiative.
MAN emphasized that the unintended adverse effects on the manufacturing sector are significant and cannot be absorbed during this evident economic downturn.
The statement read in part, “The imposition of EEL poses a potential impact on the manufacturing sector and the economy at large.
“This will in turn mark an unwarranted and unprecedented addition to the cost of doing business in Nigeria, especially to manufacturers. The manufacturing sector is already beset with multidimensional challenges. In the year 2023, 335 manufacturing companies became distressed and 767 shut down.”
The statement further noted that capacity utilisation in the sector has declined to 56 per cent amid rising interest rates and scarcity of forex needed to import raw materials and machinery.
It added, “Inventory of unsold finished products has increased to N350bn and the real growth has dropped to 2.4 per cent.”
MAN further expressed its concern that the EEL conflicts with Nigeria’s international trade agreements and the commitments outlined within them.
It contended that Nigeria, as a signatory to the African Continental Free Trade Area agreement, is committed to fostering the unrestricted movement of skilled labor across the continent, alongside implementing non-discriminatory measures against fellow Africans.
The association voiced apprehension that the implementation of the levy could provoke retaliatory actions against Nigerians employed across Africa and other global nations. Additionally, it feared that such measures could hinder regional integration efforts and potentially tarnish Nigeria’s reputation as a cooperative partner among its peers.
“We are equally worried that the imposition of such a levy could have far-reaching implications for our national economy and potentially exert pressure on our national currency could be introduced through a Handbook, rather than a law enacted by the National Assembly.
This levy, if not reversed, might expose the Federal Government to a plethora of lawsuits that would distract Government from the task of salvaging the current dire situation of our economy,” the statement added.
In its recommendation, MAN urged the president to instruct the discontinuation of the implementation of the Expatriate Employment Levy.
The Expatriate Employment Levy, a recent policy introduced by the Federal Government, aims to address wage disparities between expatriates and the Nigerian labor force, while promoting skills transfer and the employment of qualified Nigerians in foreign-owned enterprises.
Under the new levy structure, staff members are subject to a fee of $10,000, while directors face a charge of $15,000. This represents a significant departure from the previous fee of $2,000 paid by foreign nationals for the Combined Expatriate Residence Permit and Alien Card.
According to the National Bureau of Statistics (NBS), Nigerian nationals account for only 59 percent of total employment in Nigeria, with their wages constituting less than 45 percent of total wages. On average, the basic salary of expatriates exceeds the basic salary of local workers by more than 45 percent.
However, the introduction of the EEL has faced strong criticism from members of Nigeria’s Organized Private Sector, who argue that the policy may have adverse effects on Foreign Direct Investments in the country.
In a statement signed by its Director-General, Chinyere Almona, the Lagos Chamber of Commerce and Industry expressed concerns about the potential perception among foreign investors that the Nigerian government is unwelcoming to foreign workers.
The chamber voiced apprehension that such a perception could impede our efforts to attract Foreign Direct Investment inflows.
The statement read in part, “The Expatriate Employment Levy may cause unintended consequences that may trigger the relocation of foreign companies to neighbouring countries that present a more conducive and less expensive environment for business.
“The imposition of this levy may likely spark retaliatory actions taken by other countries by imposing levies on foreigners and particularly targeting Nigerian workers. This will in turn affect diaspora remittances from Nigerian workers resident in other countries.”
In the same vein, the Centre for the Promotion of Private Enterprise, in a statement signed by its Chief Executive Officer, Muda Yusuf, criticised the new policy directive.
The Centre said that the policy could be a major setback for the continental economic integration vision.
The statement read, “There are serious implications for diaspora Nigerians. The policy may trigger reciprocal actions from other countries and this may affect Nigerians in the diaspora.
“There are currently over 17 million Nigerians in various countries around the world doing extremely well in the fields of education, medicine, health, sports, media & entertainment, leadership & politics, finance, science & ICT, transportation, tourism, industry and agribusiness.”