Manufacturers applaud tax incentive initiative, says it will reduce production cost
The Manufacturers Association of Nigeria (MAN) has thrown its weight behind the tax incentive initiative stating that it will help reduce production costs and encourage innovation in the country.
The Director-General of MAN, Mr. Segun Ajayi-Kadir, stated this during a webinar organised by MAN in partnership with KPMG themed, “Catalysing Growth in a Turbulent Economic Environment: The Role of Tax Incentives”.
Mr. Segun Ajayi-Kadir, the Director-General of MAN, emphasized that incentives should be applied across the entire sector and implemented transparently and sustainably, without sudden disruptions or indiscretions.
Ajayi-Kadir noted that the challenges facing the manufacturing sector, particularly due to the current macroeconomic conditions, are exacerbated by the ongoing foreign exchange volatility and high electricity tariffs.
He criticized the multiple and high rates of taxes and levies imposed by the three tiers of government and their agencies.
He said, “Tax incentives play a crucial role in reducing production cost, driving investment, encouraging innovation, and ultimately fostering economic growth and development.”
“Through tax incentives, the government can effectively incentivise businesses to invest in key sectors, create jobs, and drive productivity.”
“By reducing the tax burden on businesses, especially in times of economic uncertainty, the government can provide the much-needed support to manufacturers and other economic actors,”
He also called on manufacturers to support the implementation of the recommendations from the Presidential Committee on Fiscal Policy and Tax Reforms.
Types of tax incentives
Ms. Elizabeth Olaghere from KPMG encouraged manufacturers to take full advantage of the various tax incentives and waivers offered by the Federal Government as part of its ease of doing business initiative.
Olaghere, who is the Head of Tax, Regulatory, and People Services at KPMG West Africa, urged the government to implement policies that can stimulate the economy, especially in the manufacturing sector, to achieve economic growth in Nigeria.
She categorized tax incentives into profit-based and cost-based incentives, noting that these are essential tools used by governments to attract new investments and expand existing ones.
Additionally, she encouraged stakeholders to provide input to strengthen the Pioneer Status Initiative (PSI), an income tax relief program in Nigeria.
Tax incentives being enjoyed by manufacturers
Mr. Matthew Osanekwu, Deputy Director of Tax Policy Advisory at the Federal Inland Revenue Service (FIRS), stated that the government had not only provided several incentives but was also committed to ensuring that businesses could access them.
He mentioned that many manufacturers, including those producing pharmaceutical products, baby products, veterinary medicine, and those in agriculture and gas, were already benefiting from certain waivers and incentives.
He further noted that there were exemptions in some Value Added Tax areas, an export expansion grant, and a 35 per cent investment allowance for a specific period.
According to him, the government was working on gazetting executive orders and interventions to ensure that the real sector could contribute to economic growth through value addition.
What you should know
In the last one year, the manufacturing sector in Nigeria has borne the brunt of recent reforms by the Federal Government which has seen the cost of production increase significantly thereby reducing profit margins and in some cases outright losses.
The Federal government has reacted by approving some tax reliefs for players in the sector such as the removal of withholding tax for farmers and manufacturers as well as some import duties suspension for those in the health and pharmaceutical sector.
