The Manufacturers Association of Nigeria (MAN) has raised concerns over the potential impact of Nigeria’s staggering N77 trillion debt on the economic plans of the President Tinubu-led administration. The association highlighted that the manufacturing sector has been disproportionately affected by the country’s debt crisis, which has witnessed a dramatic 410 percent increase in the nation’s debt profile over the past eight years.
According to the MAN CEOs’ Confidence Index (MCCI) report for the first quarter of 2023, obtained by Vanguard, the escalating public debt is having a cascading effect on the manufacturing sector. The report points out that the growing domestic debt is severely crowding out private investment in manufacturing by reducing credit availability and leading to higher lending rates.
Additionally, the report highlights the challenges posed by external debts, which are primarily serviced in foreign currencies. This dynamic contributes to a greater demand for foreign currencies, further depreciating the national currency and making the importation of critical inputs more expensive for manufacturers.
The report also highlights how the increasing debt servicing is consuming a significant amount of foreign exchange and exacerbating the longstanding forex scarcity that has plagued the manufacturing sector. The higher debt repayment requirements are placing a strain on revenue.
MAN also criticized the Nigerian government’s imposition of high and multiple taxes on manufacturers in an attempt to generate revenue, leading to a hostile business environment. The association argues that the country’s debt crisis isn’t solely due to revenue inadequacy, and it is counterproductive to rely on manufacturing taxes as a solution to the debt problem.
Despite the exponential increase in the country’s debt profile, the manufacturing sector continues to grapple with challenges such as infrastructure decay, forex scarcity, credit shortages, and naira depreciation, which have persisted for years.
The report suggests that Nigeria’s true problem lies not in revenue generation or collection but in the mismanagement of collected funds. MAN emphasizes that inheriting a debt burden of N77 trillion will likely hinder the achievements of the new administration.
To address these issues, MAN has put forward several recommendations, including expanding the tax net to capture informal sector businesses, enforcing the Voluntary Assets and Income Declaration Scheme (VAIDS) through the Federal Inland Revenue Service (FIRS), plugging tax law loopholes to prevent revenue leakage, promoting fiscal discipline by reducing governance costs, and adhering to relevant fiscal responsibility and Central Bank Act sections.
As Nigeria grapples with its mounting debt burden, the manufacturing sector’s challenges underscore the need for comprehensive measures to safeguard the economy’s stability and future growth under the leadership of the President Tinubu-led regime.