In a sobering report released by the Manufacturing Association of Nigeria (MAN), the state of the manufacturing industry paints a grim picture as the country’s economic challenges escalate.
According to the findings, a staggering 767 manufacturing companies closed their doors in 2023, while an additional 335 faced severe distress. This unsettling trend, the report said, stems from a confluence of economic hurdles, including exchange rate volatility, escalating inflation, and a general deterioration of the investment climate.
The repercussions of these adversities have been profound, significantly hampering the performance and sustainability of the manufacturing sector, a vital component of Nigeria’s economy.
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Among the myriad challenges faced by manufacturers, the recent introduction of the Expatriate Employment Levy (EEL) by the Federal Government has sparked considerable consternation. Under this levy, companies are required to pay $10,000 for staff and $15,000 for directors, representing a stark escalation from the previous $2,000 fee for the Combined Expatriate Residence Permit and Alien Card.
In the words of a MAN spokesperson, “The imposition of EEL poses 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 EEL, seen as a counterproductive measure, threatens to compound the existing challenges faced by manufacturers, further squeezing their already thin margins. With the manufacturing sector reeling from a decline in capacity utilization, which has plummeted to a mere 56%, coupled with skyrocketing interest rates and a scarcity of foreign exchange essential for importing raw materials and machinery, the introduction of the EEL adds insult to injury.
Moreover, the sector grapples with an inventory of unsold finished products valued at a staggering N350 billion, alongside a sobering drop in real growth to 2.4%.
Beyond its domestic ramifications, MAN warns of potential conflicts between the EEL and Nigeria’s international trade agreements, such as the African Continental Free Trade Area agreement. The levy’s imposition could incite retaliatory measures against Nigerian expatriates working abroad, impede regional integration efforts, and tarnish Nigeria’s standing on the global stage.
In response to these pressing concerns, MAN has issued a fervent appeal to President Bola Tinubu, urging a reconsideration of the EEL’s implementation. The association notes the grave repercussions of this levy on the manufacturing sector and the broader economy, advocating for its discontinuation to avert further distress within the sector and align with the overarching objectives of economic growth and development in Nigeria.
MAN advocates the urgent need for decisive and proactive measures to alleviate the burdens weighing down the sector, noting that only through concerted efforts and prudent policy interventions can Nigeria’s manufacturing sector regain its footing and contribute meaningfully to the country’s economic prosperity.
MAN’s full statement:
“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 capacity utilization in the sector has declined to 56%; interest rate is effectively above 30%; foreign exchange to import raw materials and production machine inventory of unsold finished products has increased to N350 billion and the real growth has dropped to 2.4%. Expatriates in Nigeria currently pay more than $2000 for CERPAC. The sector cannot afford another disincentive to increased investment and portfolio expansion.”