At least 767 manufacturers shut down business, while 335 became distressed in 2023.
The Manufacturers Association of Nigeria, MAN, Director General, Ajayi Kadiri, disclosed this in a recent statement while reacting to the hardship in the country and the recently introduced Expatriate Employment Levy by the
(MAN) has revealed a disturbing trend within its sector arising from the current economic crisis and Government policies,.
The group, in a recent report said about 767 manufacturing companies shut down operations while 335 experienced distress in 2023 leading to unsold goods of about N350 billion.
It attributed the development to various economic difficulties, including exchange rate volatility, rising inflation, and a general worsening of the investment climate.
These adversities have taken a toll on the manufacturing sector, significantly impacting its performance and sustainability.
Many of the firms recorded huge losses in their 2023 financial statements, resulting in lean assets sizes, compared to the previous year.
Nigerian Breweries recorded N106 billion loss; Nestle Nigeria posted N104 billion loss, Dangote Sugar suffered N73.8 billion loss while Cadbury Nigeria incurred N27.6 billion loss – all in the 2023 financial year.
MAN’s revelations came alongside its criticism of the Federal Government’s earlier introduced Expatriate Employment Levy (EEL), which the association argued contradicts the objectives laid out in President Bola Tinubu’s Renewed Hope Agenda and the core principles of his Fiscal Policy and Tax Reform initiative. The policy has just been suspended.
The imposition of this levy was seen as a counterproductive measure that could exacerbate the already challenging conditions for manufacturers in Nigeria.
Introducing the Expatriate Employment Levy had sparked considerable concern among industry stakeholders. According to MAN, the levy, which charges $10,000 for staff and $15,000 for directors, represents a drastic increase from the previous $2,000 fee for the Combined Expatriate Residence Permit and Alien Card.
The new levy was criticised for potentially increasing the cost of doing business in Nigeria, particularly for manufacturers grappling with numerous challenges.
The manufacturing sector, as reported by MAN, has seen a decline in capacity utilisation to 56%, compounded by rising interest rates and a scarcity of foreign exchange needed for importing essential raw materials and machinery.
The sector also faces an inventory of unsold finished products valued at N350 billion, alongside a real growth drop to 2.4%.
“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 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,” the statement read.
MAN had highlighted the potential impact of the now suspended expatriate employment levy on Nigeria’s international trade agreements, such as the African Continental Free Trade Area agreement, which aims to enhance the free movement of skilled labour across the continent.
The association feared that the levy could prompt retaliatory measures against Nigerians working abroad, hinder regional integration efforts, and tarnish Nigeria’s image on the global stage.
It was in light of these concerns that MAN called on President Tinubu to reconsider the implementation of the Expatriate Employment Levy, warning of its negative consequences on the manufacturing sector and the broader economy. The association urged discontinuing the levy to further distress within the sector and align with the broader goals of economic growth and development in Nigeria.
With the huge losses recorded by major manufacturing companies, and the closure of a large number of businesses in the sector, it is obvious that the government will equally experience a huge drop in tax revenue compared with the previous year.
Some firms will not be able to declare dividends this year while others will manage to pay a little, thereby putting the shareholders’ expectations in the reverse.
