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Tag: Mr. Segun Ajayi-Kadir

  • MAN Warns Against Planned 4% Free-On-Board Levy Reintroduction by Nigeria Customs

    MAN Warns Against Planned 4% Free-On-Board Levy Reintroduction by Nigeria Customs

    The Manufacturers Association of Nigeria (MAN) has expressed concerning apprehension over the reported plans by the Nigeria Customs Service to re-introduce the 4% Free-on-Board Levy. The Association cautions against this inauspicious development because of the inevitable catastrophic impact it will have on the manufacturing sector in particularly, the business community and the people of Nigeria in general

    The Association views this new development as an unfortunate and retrogressive one, claiming that the extensive stakeholder engagement promised has not been inclusive and quite importantly, has not taken into consideration the affected stakeholders, which to a large extent, are manufacturers. MAN opined that the overwhelming opinion of the stakeholder engagement would have dissuaded the Service from implementing the levy and proffered a more progressive and sustainable option for increased revenue for the NCS and government.

    If implemented, this will be an additional burden to the 1% Comprehensive Import Supervision Scheme (CISS) fee being paid by its members at a time that 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.

    According to the Director General of MAN, Segun Ajayi-Kadir, “It is equally worrisome that this is coming at a time when there is still a looming danger of the unwarranted 15% 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”.

    We had expected that the NCS would ultimately rescind the move to introduce the evidently unpopular and ill-timed levy. We didn’t expect to read on the pages of newspapers that the levy will be reintroduced, even before the promised wide consultation with stakeholders like MAN and other private sector organizations. We admonish that the decision should be put away before it worsens and degenerates into an economic quagmire.

    Ajayi-Kadir reiterated that what was needed at this time was the prioritization of improved trade facilitation that would mitigate the prevailing constraints militating against the optimum performance of the productive sector. He posited that, giving the prevailing economic downturn, the imposition of the levy would only exacerbate the spiraling cost of production and ultimately compound the dissipating disposable income of the average Nigeria.

    We had expected that, in line with the prevailing economic reform agenda of government that seeks to streamline fiscal policies and engender a progressive and business friendly tax regime, we should be experiencing a demonstrated aversion to introduction of fees and levies by government agencies and institutions. This is the time for all government institutions to recommit to the reduction of the cost of doing business; expanding the scope of businesses and incentivizing new entrants in the face of high business mortality.

    For the umpteenth time, we reiterate that the unassailable reasons why the levy should not be implemented include the following:

    1. 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 percent from ₦2.07 trillion in the first nine months of 2023 to ₦4.53trillion in the same period of 2024.
    2. The 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.
    • The levy is coming at a time when the headline inflation has hit a historic record of 34.8 percent 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 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.
    •  As an addition to the existing 1% CISS fee, extant duties and other cargo clearance charges, the new Customs Operations levy will increase import transaction costs, compound the already high cost of doing business significantly.
    • 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.
    • It will jeopardize 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 jeopardize our aspiration to be an investment destination of choice and an industrial hub in the West African sub-region.

    It is in view of the foregoing that we implore the Federal Government to urgently direct the Nigeria Customs Service to jettison the idea of the re-introduction of the 4% Free-on-Board Levy.

    In conclusion, 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-industrialization stares us in the face.

    We should not be heading in a different direction when most governments across the world are aggressively promoting their industrialization agenda and pushing highly nationalist agenda to grow their domestic production.

  • CBN’s FX Forward Delays Cripple Manufacturing Sector- MAN

    CBN’s FX Forward Delays Cripple Manufacturing Sector- MAN

    The Manufacturers Association of Nigeria (MAN) has raised serious concerns over the Central Bank of Nigeria’s (CBN) failure to honor $2.4 billion worth of foreign exchange forward contracts. This breach of contract has plunged the manufacturing sector into a severe crisis, with far-reaching consequences for the Nigerian economy.

    The manufacturing sector has borne the brunt of this crisis, with companies incurring substantial losses, disrupting production, and facing mass job cuts. The inability to fulfill foreign exchange obligations has crippled operations and eroded trust among international partners.

    MAN is urging the CBN to prioritize the resolution of this issue, restore confidence in the Nigerian business environment, and implement measures to prevent a recurrence.

    Details of the statement signed by the Director General, Segun Ajayi-Kadir,mni can be found below

    “Foreign exchange forward contracts are financial instruments and are globally practiced to enable businesses to hedge against exchange rate fluctuations by locking in a future exchange rate. The Central Bank of Nigeria traditionally issues these contracts, promising to deliver foreign currency at a specified future date in exchange for upfront naira payment.

    However, the CBN recently announced its inability to honour $2.4 billion worth of forward contracts, citing an ongoing investigation by the Economic and Financial Crimes Commission into some foreign exchange transactions. It is expedient to note that many businesses borrowed money from banks for working capital that was used by the banks to open clean line for letter of credit for the companies based on the allocated forward contract from the CBN. In this case no clear allegations or infractions have been communicated to any of our members and non have been indicted for any infractions. The forwards have remained unredeemed.

    This $2.4 billion worth of forward contracts from the backlog of $7 billion has triggered severe crisis for the manufacturing sector and Nigerian economy. Worse still, the commercial banks have continued to charge dollar account along with other Naira bank charges such as 35% interest rate on the facilities that these companies have with their banks. All these have significantly eroded the working capital of the companies who barely make margins of 5% on the sales of the products. This rather worrisome breach of contract has further exacerbated currency risk for businesses, leading to substantial financial losses and operational disruptions.

    Businesses with substantial foreign exchange liabilities face acute credit and liquidity risks due to their inability to settle forward contracts. This strains cash flow and jeopardizes overall financial stability. While many small and medium-sized enterprises have been forced to close or temporarily suspend operations, larger corporations have incurred massive foreign exchange losses exceeding over N300 billion in the second half of 2023. This situation has been exacerbated by the continuous depreciation of the naira, which has depreciated by more than 72%, from N450 to N1600 per dollar over the past year. Financial planning and budgeting have been severely compromised due to the uncertainty surrounding future exchange rates. The cascading effects on the economy are far-reaching, impacting production, employment, government revenue, and overall economic growth.

    Quite frankly, the CBN’s non-fulfillment of its forward contract obligations has led to a cascade of negative consequences. Manufacturing concerns have been worse hit. For instance, within the last 6 months, companies have incurred over N1.5 trillion in forex-related transactions losses, contributing to the poor and worsening performance of many businesses. The resulting exchange rate differentials and the burden of interest on loans to meet Naira deposit requirements have been entirely transferred to manufacturers, increasing production costs and impacting product prices.

    This crisis has disrupted manufacturing supply chains, hindered productivity, and jeopardized job security. Consequently, businesses are struggling to meet their loan repayments, leading to the rescheduling and restructuring of loan terms. Due to numerous challenges, such as high production costs and low consumer demand currently confronting manufacturers, there is little hope of meeting financial obligations as scheduled. As a result, these rescheduled loans often come with higher interest rates. The immediate implication of this is the declining contribution of the sector to the overall economy. The erosion of trust among foreign suppliers and financial institutions, triggered by businesses’ inability to honour their initially issued letters of credit, has further compounded the challenges of foreign financial flows and investment in the country. All these adversely affect the business operations and the Nigerian economy at large.

    The Manufacturers Association of Nigeria (MAN) has done a detailed analysis outlining the far-reaching consequences on the manufacturing sector. MAN implores the CBN to give serious and expedited consideration to the imperative of the sanctity of contracts, explore avenues to resolve outstanding obligations, and prioritize the interests of businesses that have acted in good faith. Reneging on these legally binding contracts potentially undermines the CBN’s credibility and may damage investor confidence. The resulting financial strain on manufacturing businesses has led to widespread closures, job losses, and economic turmoil. The manufacturing sector has borne the brunt of this crisis, with a staggering 108.7% increase in job losses in 2023 alone.

    To prevent further damage, MAN urges collaboration between the CBN, the Federal Ministry of Finance, and the private sector to develop a sustainable framework for resolving outstanding forward contracts and improving foreign exchange inflows. By prioritizing the survival of the manufacturing sector, the government can mitigate the negative impacts of this crisis and foster economic recovery.

    In conclusion, the continued non-redemption of the $2.4 billion forward contracts poses a grave threat to the survival of some Nigerian manufacturing companies and jeopardizes the livelihoods of thousands of workers. As companies grapple with the inability to fulfill their offshore obligations due to the CBN’s non-delivery of dollars, many face the grim prospect of downsizing or shutting down operations completely. This gloomy scenario is avoidable and the time to end the impasse is now.”

  • MAN Berates decision of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria

    MAN Berates decision of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria

    The Manufacturers Association of Nigeria (MAN) has berated the Central Bank of Nigeria over the decision of the Monetary Policy Committee on the meeting held on September 27, 2022.

    The perspective issued by MAN was assented by the Director-General, Segun Ajayi-Kadir, mni and it is herein published below-

    1.0 ​Preamble

    The Monetary Policy Committee (MPC) in Communique No. 144 of the Third Quarter 2022 meeting recognized the global economic tension occasioned by the Russian-Ukrainian war with the associated disruption of the global supply chain, degenerating global financial situation and accelerating world inflation.

    Consequently, the Committee increased the Monetary Policy Rate (MPR) by 150 base points to 15.5% with an asymmetric corridor of +100/-700 basis points around the MPR; and Cash Reserve Requirement (CRR) by 750 base points to 32.5%; while retaining the Liquidity Ratio at 30%. The increase was aimed at moderating the high inflationary pressure on the economy and narrow the gap between the hitherto MPR of 14% and the inflation rate which stood at 20.52% in August 2022 in order to improve the level real interest rate. Of course, real interest rate is critical to prospective investors who would want optimize their investment earnings.

    2.0​ Implications for the economy and manufacturing sector

    The increase in the two monetary parameters, MPR and CRR portends worrisome negative consequences for the manufacturing sector, some of which include: 

    ➢      Increased cost of borrowing by manufacturers, further beyond the extant double-digit rate, which disincentivize new investments in the sector;

    ➢      Increased factor costs which feed into high product prices, making the sector uncompetitive;

    ➢      High product prices, which makes patronage to plummet and lead to huge inventory of unsold manufactured products in the sector.

    ➢      High inventory of manufactured products will trigger a reverse effect in the sector as manufacturing capacity utilization, production, employment, profit and tax contribution to the national building will decline.

    3.0 ​Going forward  

    In consideration of the prevailing scenario around an increase in the interest rate and access to funds, tougher times are ahead for the productive sector. Clearly, the increase in MPR from 14% to 15.5% will rub-off negatively on other rates and dash the hope for a single-digit lending rate for the productive sector in the economy. Moreover, the observed continuous contractionary monetary policy posture without complementary fiscal support may not effectively reduce the prevailing inflationary pressure on the economy. This is not unconnected with the fact that the current increase in the Consumer Price index as reported by NBS is not largely driven by the monetary phenomenon, as self-inflicted weak foreign exchange rate management can be linked to the pressure.  

    An experiential x-ray of the prevailing economic stance revealed that the domestic output gap due to the inefficiency of the macroeconomy, unguided industry development, inclement and high-cost operating environment, exploitative regulatory ecosystem and some externalities are predominantly responsible for the rising inflation that the nation is experiencing. 

    4.0 Conclusion

    It is important that the monetary authority strategically set in motion a mechanism for holistic balancing of the real interest rate, which is critical to investment and not just following leading economies to adjust interest rate without considering domestic peculiarities. Interest rate (MPR), Inflation and Exchange Rate are triadically critical to investment and production. Balancing the rates in line with local aspiration is therefore imperative.  Regrettably, at the moment, other contributory factors like insecurity and externalities induced food shortage; the Government’s excessive drive for internally generated revenue, increase in interest rate in the US; unsustainable and unpragmatic interventions in the forex market; the acute shortage of forex and unfriendly exchange rates are not only fueling inflation, but seriously depressing industrial production.

    Consequently, MAN is hopeful that the CBN will creatively go beyond the conventional monetary management system, because global economic dynamics are changing and conventional measures may no longer be effective. In the light of the above, we recommend as follows:

    ➢      Upscale the current efforts at improving the availability of development-oriented funds at the single-digit interest rate, prioritizing industries.

    ➢      Promote a more robust production-centric forex management and intervention in the official forex market, leveraging on sustained increase in crude oil price in the global market;

    ➢      Give priority attention to meeting forex requirements of the industry’s vital inputs that are not available locally, to sustain and ramp up production;

    ➢      Intentionally promote monetary and fiscal policy fusion; that is, the Central Bank of Nigeria and the Federal Ministry of Finance, Budget & National Planning should jointly put complementary measures in place in support of domestic manufacturing.

    ➢      Emplace the framework that will facilitate harmonious implementation of relevant policy guidelines aimed at boosting productivity.

    Undoubtedly, the implementation of these measures will enable industries to remain in business; increase aggregate output; improve contribution to GDP and ensure inclusive and sustainable economic growth.

  • Nigeria and Nigerians must explore opportunities in the Digital Economy to eradicate poverty- Danbatta

    Nigeria and Nigerians must explore opportunities in the Digital Economy to eradicate poverty- Danbatta

    The Executive Vice Chairman/ CEO, Nigerian Communications Commission, Professor Umar Garba Danbatta on Thursday addressed the 9th Lagos Public Relations Stakeholders’ Conference on Leadership and Poverty Eradication.

    The EVC, represented by Mrs. Nnena Ukoha, Head, Corporate Communications, called on Nigerians to explore opportunities in the Digital Economy to eradicate poverty in the country.

    Speaking on the topic, Poverty Eradication in Nigeria: Leveraging Opportunities in a Digital Economy, he noted that ”For most developing countries, particularly those with large populations, inadequate infrastructure has made it difficult to participate as equal partners in the worldwide enterprise of knowledge production and dissemination.  This portends an unequal distribution of access, resources and opportunities in this new economy, the Digital Economy.  To avert the birth of a new type of poverty (Information Poverty), the ICT gap (digital divide) between the developed and developing nations must be bridged.”   

    That Nigeria like most developing nations is not enjoying the full benefits of the ICT revolution due to inadequate telecommunication infrastructure, capacity to maintain existing infrastructure, and policies for equitable public participation as producers and consumers of information and knowledge.

    “A nation’s development is measured in economic terms such as per capita income, Gross Domestic Product (GDP), and Gross National Product (GNP), among other indices. Indices such as level of literacy, social development, human capital development, cultural innovation and technological preparedness are not regarded as a measure of development.  If we must tap into the ICT revolution, then it is time for a paradigm shift!  The traditional economic terms are not a reflection of the new age of the Digital Economy “he said.

    On efforts made by the Nigerian government, “There are several past and ongoing efforts by the Nigerian Government to alleviate poverty through ICT using organizations and programmes like the National Information Technology Agency (NITDA), using the offices of the Nigerian Postal Service (NIPOST) across the country as ICT hubs, the Universal Service Provision Fund (USPF) to ensure that telecommunications services are accessible to the widest number of people (and communities) at affordable prices.   USPF has poverty-reducing activities like the Community Resource Centers, USPF Hackathon, RUBI – Rural Broadband Initiative,  UnICC – University InterCampus Connectivity,  BTS – Base Transceiver Stations, IRC – Information Resource Centres, SKC – School Knowledge Centres, and the E–Health Project. “

    The EVC said that “NCC will continue to support the vision of the present government to put Nigeria amongst the top twenty in the comity of Nations and to align our developmental goals in keeping with the seventeen United Nations Sustainable Development Goals (SDGs) but particularly the goal to eradicate extreme poverty for all people everywhere which is currently measured as people living on less than $1.25 a day, by year 2030. 

    He listed initiatives at the NCC directly or indirectly target poverty eradication to include;

    “Advanced Digital Appreciation Programme: Transforming the Academics: Advanced Digital Appreciation Programme for Tertiary Institutions, ADAPTI is aimed at bridging the digital divide existing in academia with the provision of computers and other ICT facilities to equip the lecturers and other experts in order to improve ICT skills and also to enrich the students. The overriding objective of this intervention has been to elicit the pervasive application of ICT skills in academia for enhanced staff output, institutional efficiency, and student enculturation to e-based learning for sustainable national growth.” 

    “Digital Awareness Programme (DAP): this is a special intervention programme to address the digital information knowledge gap in the country, especially among the teeming youthful population.  On the last count, the DAP Project supports 229 Secondary Schools across the Six (6) Geopolitical Zones of Nigeria, including the Federal Capital Territory. The strategy in this programme is to expose schools and colleges to Information and Communications Technology (ICT) awareness, usage and application by facilitating access to ICT tools by the provision of twenty-one (21) Desktop Computers, Local Area Network, Printers, Scanners, VSAT Dish and deployment of one Year Bandwidth Subscription for Internet Access.”

    “NCC- Digital Bridge Institute (DBI) Projects: Nigeria’s ICT flagship institution, the Digital Bridge, DBI, came into existence in 2004 to impact on the national ICT human capital building efforts by bridging the ICT knowledge gap.” 

    “Frequency Auction: Contributing to National Purse: The Nigerian telecom regulator has contributed to the Federation Account from proceeds of frequency auctions and licensing. The frequencies auctioned, are in turn used for the deployment of services for poverty reduction and the benefit of the citizenry. The Commission has a clear understanding of this value chain and is determined to uphold it. “

    “Value Added Services (VAS): Telecommunication has given birth to several value-added services that open up benefits to all cadre of people irrespective of location and level of education. These VAS are great channels for revenue generation. Some VAT are content development, Phone repair network, IT device accessories sales market (phone pouches, screen covers etc), Ringback tones, and even government agencies providing service on telecom platform e.g NAFDAC – drug authentication code. “

    On broadband and poverty , “The Nigerian National Broadband Plan 2020–2025 (the “Broadband Plan”) devotes an entire section to targets, strategies and roadmaps to promote pervasive broadband deployment, increased broadband adoption, usage and availability to all at affordable prices.  These all point to government’s commitment to harmonizing and utilizing the benefits derivable from ICT for the good of all. “

    “In 2020, the latest National Broadband Plan was approved to foster fuller economic exploitation of ICTs. This means that there will be more pervasive deployment and usage of ICT to push the development and economic attractiveness of the nation.”

    He assured that The Federal Government of Nigeria is committed to sustainable development of the ICT subsector for the growth of the economy and the eradication of poverty.  “This was made evident during the just concluded Communications sector retreat where the Ministry of Communications and the agencies under it converged to chart a five-year plan that would make communications services, affordable, accessible, and available to all persons in Nigeria.”

    He concluded that “The credit for Nigeria’s ambitious broadband pursuit is traced to the potentials and prospects of broadband technology, the ease of deployment and the vast opportunities available through it.  The Commission will continue to put strategies in place to pursue the last mile deployment of broadband. This would ensure small businesses are positioned to compete globally and communities and individuals are able to create wealth through access to ICT.”

    “By providing access to information, making markets more efficient, fostering social inclusion, and equalizing opportunities in rural areas, ICT offers an innovative and unprecedented tool to directly reduce poverty.”

    Other speakers at the event include; Founder and Chairman, Heirs Holdings, Mr. Tony Elumelu; Mr. Segun Ajayi-Kadir, Director General, Manufacturers Association of Nigeria (MAN); Sheila Ojei, Director Strategy, Funding and Stakeholders Management, LSETF; The Commissioner for Women Affairs and Poverty Alleviation, Lagos State, Mrs. Cecilia Bolaji Dada and Dr. Oluseye Ajuwon, Economist and Consultant, University of Lagos.

  • MAN condemns introduction of Excise Duty on All Non-Alcoholic Carbonated and Sweetened Beverages by the Federal Government

    The Manufacturers Association of Nigeria (MAN) has condemned the introduction of excise duty of N10/liter on non-alcoholic, carbonated, and sweetened beverages, despite its potential overwhelming negative impact is rather unfortunate. There is no doubt that the potential revenue gains are the basis for the introduction of this excise.

    In a statement from the Director-General of the association, Mr. Segun Ajayi-Kadir, mni, said, “It would appear that the goose that lays the golden eggs is being led to perdition. Seeing that the affected sub-sector has contributed most significantly to the economy and taxes, despite the debilitating impact of Naira devaluation, the inadequacy of forex, and the COVID-19 pandemic. The food and beverage contributed the highest (38%) of the total manufacturing sector to the GDP! It comprises 22.5% of manufacturing jobs and generates more than a 1.5million jobs. So, this excise would certainly cast a sunset to this performance.”

    Furthermore, recent studies have shown that Introducing excise on non-alcoholic beverages is likely to cause a 0.43% contraction in output and about 40% drop in total industry revenues in the next five years.

    The revenue aspirations of the government in introducing this excise may not be justified in the long run.   Let us look at it this way. The government is estimated to generate an excise tax of NGN NGN81bn between 2022-2025 from the group. This will not be sufficient to compensate the corresponding government’s revenue losses in other taxes from the Group. For instance, the corresponding effect of reduced industry revenue on government revenues is estimated to be up to NGN142bn contraction in VAT raised by the sector and NGN54bn CIT reduction between 2022 to 2025. This is not to mention the potential negative

     Impact on Manufactures/Supply Chain –

    What is not realized by many of that excise begets high production costs which in turn adversely affect production levels and intimately result in dwindling profits. This will grossly impact the small and emerging business owners in the non-alcoholic beverage sector.

    Nigeria is the 6th highest consumer of soft drinks but per capita consumption is low. Introducing excise will easily reduce production capacity causing manufacturers to struggle to meet investor commitments as well as cause investors to make investments to other countries.

    A decrease in production levels or the ability to purchase raw materials as a result of the introduction of excise tax will result in reduced profits for the supply chain players in the non-alcoholic beverage sector.

    One is particularly worried about the ripple effect on the introduction of the excise, despite strenuous evidence-based advice to the contrary. This will have an unpleasant impact on employment, households and consumers.

    As seen from previous impact analysis, excise affects production outputs, revenues, and profits. This causes companies to pursue cost-cutting measures to reduce the effect of diminishing revenue and profits by reducing employee salaries or retrenchment.

    Presently, the country’s unemployment rate is at about 33.3 % and at this rate is projected to further increase. A further cut in jobs for an industry that employs over 1.5 million people, directly and indirectly, will worsen the unemployment position in the country resulting in an increase in social vices and moral decadents.

    There will certainly be a decline in private households/consumers’ purchasing power as they earn income mostly by supplying labor to the industry and from owning a share in industry capital. Households in turn use this earned income to purchase food, shelter, and products from this manufacturing industry. An introduction of an additional tax will cause manufacturers in a bid to offset tax and maintain profit raise prices of their products to higher rates thus shifting tax incidents to consumers

    He reminded the government that non-alcoholic beverages serve as a quick source of carbohydrates and nutrients in the absence of actual food for the average low-income earner. For example, a quick meal is a bread or gala and a bottle of soft drink. However, an introduction of excise could lead to an increase in price putting this food alternative out of the reach of the poor segments.