The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, disclosed on Monday that the Federal Government has infused palliatives worth N1 trillion into the manufacturing sector over the past year.

This significant financial injection aims to rejuvenate the sector, which is already witnessing positive outcomes.

Additionally, the Chairman of the Federal Inland Revenue Service (FIRS), Mr. Zacch Adedeji, highlighted that an accelerated stabilization fund, focused on revitalizing the manufacturing sector, is being allocated alongside a series of legacy projects designed to enhance infrastructure and make the sector more viable.

These announcements were made during an interactive session on the Finance Act (Amendment) Bill 2024, organized by Senator Sani Musa (APC Niger East) and the National Assembly’s joint committee on Finance.

In response to the Committee’s request to consider the manufacturing sector as a beneficiary of the proposed tax on bank foreign profits (windfall tax), Edun affirmed that the sector has already been substantially supported. He stated, “Palliatives worth N1 trillion have been injected into the manufacturing sector within the last year, with attendant positive results in terms of reinvigoration.”

Adedeji elaborated on the strategic programs of the President Bola Tinubu-led federal government, noting their focus on revitalizing the manufacturing sector. He explained that the proposed one-time windfall tax is intended to redistribute wealth, benefiting various sectors.

Adedeji highlighted the accelerated stabilization funds and legacy projects aimed at making the manufacturing sector more vibrant and viable.

He mentioned specific infrastructure projects such as the Badagry-Sokoto Highway, which would reduce travel time between Badagry and Sokoto to 11 hours, and the Lagos-Calabar Coaster Highway, enhancing connectivity and supporting the manufacturing sector’s growth.

“Also, the Lagos-Calabar Coaster Highway is another strategic road infrastructural project that will bring about the required connectivity for reinvigorating the manufacturing sector.

“The plan of President Bola Tinubu on the economy, manufacturing sector, and development generally is very robust,” he said.

The Windfall Tax Proposal

The sharing of the one-time windfall tax between the federal government and banks remains a point of contention. President Tinubu’s executive bill proposed a 50% sharing formula for both parties. However, some committee members suggested an upward revision to about 70%.

Concerns Over the Windfall Tax

Economists and stakeholders have expressed concerns about the potential negative consequences of the proposed windfall tax. They argue that the unpredictability and retroactive nature of the tax could deter future investments, both foreign and local.

Investors typically seek stable and predictable environments, and any perception of fiscal unpredictability can lead to capital flight and reduced investment inflows.

Analysts have warned that the proposed tax could destabilize financial markets by introducing uncertainty and reducing investor confidence. Banks and other financial institutions may face challenges in planning and managing their finances, leading to broader economic instability.

Nigeria’s economy is already battered by various challenges, including declining oil revenues, high inflation, and significant unemployment rates. The economy, heavily reliant on oil exports, has struggled with fluctuations in global oil prices, reducing foreign exchange earnings and straining public finances.

Given this fragile economic state, economic experts have cautioned the government against implementing policies and moves that could further deflate investor confidence. The consensus among experts is that any policy perceived as unpredictable or punitive could exacerbate the country’s economic woes.

They warned that the windfall tax if not carefully implemented, could finish off the already weakened economy. The warning stresses the importance of maintaining investor confidence, which is crucial for attracting both domestic and foreign investments needed to spur economic growth and development.

A president in an east African country partly won an election attacking Dangote Cement. As the insult and attack continued, Dangote shut down a $500 million cement factory: “Africa’s richest man, Aliko Dangote, has shut down his $500 million factory in Tanzania owing to high business costs and a fall out with the government … Dangote was invited to Tanzania to do business by former President Jakaya Kikwete in 2014 and was promised access to cheap natural gas to power the factory.”

When Dangote left, everyone expected the president to replace him with the promised “new investors”. Months came and went, no new investor was licensed. Despite opening the country to imports, prices of cement went up and builders complained. In the end, the president came to Nigeria, and asked Alhaji to return, while promising to support the plant with cheap energy. Dangote returned, prices of cement went down, and everyone rejoiced.

Good People, Nigeria must be careful with Aliko Dangote. He is one of the few businessmen in Africa that can exert the Conglomerate Tax in Africa, as I wrote in my book – The Dangote System: Techniques for Building Conglomerates. He has a clear path: the African free trade agreement, AfCFTA, can work for Dangote and his empire, and he can play that agreement against Nigeria (make in one country, sell anywhere with minimal tariff).

Yes ohh, we’re reading that he is in Gabon on the president’s invitation (see photo), and they’re discussing interests to set up cement, fertilizer, etc factories there. If he closes the Nigerian plants, we will lose all the jobs and still use Dangote Cement, because of AfCFTA!

Why? Making Dangote Cement is cheaper in Tanzania, Ethiopia, etc because those countries subsidize his operations via cheap electricity. In Nigeria, Dangote produces his own electricity  – about 40% of the total electricity consumed in Nigeria. This is the reason why his cement is slightly cheaper in Ethiopia, etc; these countries pay his electricity bills unlike in Nigeria where he runs his own NEPA as a private national grid!

Nigeria: be careful before we annoy this tiger. He can bite badly.