National and sub-national governments in Nigeria, have been urged to stop making the nation’s Fast Moving Consumer Goods (FMCG) industry the target of their revenue mobilisation drive; since such act has been responsible for the slow pace of growth in the $20billion sector.
Making this plea in Lagos, during the fourth edition of The Industry Summit, held recently, the Corporate Affairs & Sustainability Director, Coca Cola Hellenic Bottling Company, Mr. Ekuma Eze argued that companies in the FMCG sector have always come out bruised whenever governments embark on such revenue mobilisation drive.
According to him, the FMCGs, which form the largest chunk of the manufacturing sector in Nigeria, and the fourth largest sector of nation’s economy sector, are over-burdened with taxes and levies, compared with their counterparts in other countries.
Eze, in his paper titled: ‘FMCG: Impact of Government Policy Shift on The Industry and Consumers’ argued that the introduction of, and increase in taxes, in recent times, bore eloquent testimony that companies in the nation’s FMCG remain the target of the government’s revenue drive.
“Company income tax rate in Nigeria is 30 percent for companies with gross turnover greater than N100million, compared to an Africa average of 23.5% and a worldwide average of 23.4 percent.
“Tertiary Education Tax is now 3 percent going by the Finance Bill 2022. There’s been consistent increase in excise tax for beer and tobacco companies while N10/1 excise tax was introduced in June 2022,” he stated.
He noted that the introduction of this new tax regime, due to price elasticity of demand, which is high among lower income consumers, who are major consumers of the products, has led to a revenue decline of 16 percent between June 1 and December, last year, in the sector, which presently employs over 3million people.
The business leader also lamented the negative impact of the recent Naira Redesign Policy on the sector, noting that the policy had succeeded in significantly reducing sales between February and March, this year, by between 20 percent to 60 percent.
A fallout of this, he added, is the re-organisation option being contemplated by some companies; a development, he noted, may further compound the nation’s unemployment issue.
“According to the CBN, the policy would enable it take control of the naira in circulation, manage inflation, combat counterfeiting, and ransom payment.
“But, trade and commerce have however taken a beating. This is because consumer spending accounts for two- thirds of domestic output. Many FMCGs reported significant sales decrease in February and March by between 20-60%. Many of these businesses are planning to restructure, which will worsen the unemployment problem,” he stated.
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