Manufacturers unable to reach potential as multiple taxation remains

Manufacturers have voiced strong concern about the rising cost of doing business in Africa’s most populous nation, especially in rural areas where multiple taxes from states and local authorities are driving up production costs.

Experts say the indiscriminate imposition of the same types of taxes by the three tiers of government and other agencies are consistently preventing manufacturers from creating sufficient jobs and expanding the economy.

This was the summation of experts at BusinessDay’s ‘Unlocking Nigeria’s Manufacturing Potential: Strategies for Sustainable Growth Amid Economic Turbulence’ event, held recently.

At a panel discussion focused on mitigating the impact of multiple-layered taxation and infrastructural deficit, George Olutope, managing director of Coleman Technical Industries Limited, said multiple taxation is always at the doorstep of manufacturers from all levels of the government —local, state and federal.

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“If businesses have to provide their own water, energy, and infrastructure, then what is the multiple taxation for?” Olutope asked.

He noted that every business owner in Africa’s most populous nation is a local government in their own right, contributing to the different infrastructure, including roads and energy, to create an enabling environment.

“There are infrastructural deficiencies or barriers to entry on the face of every manufacturer today. However, it is fortunate that businesses in Nigeria are resilient,” he added.

According to him, the success of any business lies in being positive regardless of any negative circumstances.

“You shouldn’t come to Nigeria to do business if you are not ready to surmount the economic deformities,” he said, noting that while businesses are faced with multiple flip-flop policies, they have to find a way to surmount them.

According to Olutope, while there are challenges in the manufacturing sector, there remains a wide range of opportunities for business owners to tap into.

“When I mentor manufacturers, I ask them what their 10-year plan is. This is because they must know how to mitigate against systems that can lead to collapse,” he explained.

Speaking on how manufacturers can uphold standards to position their competitiveness and relevance, Olutope urged Nigerians not to be “penny-wise pound-foolish.”

He said the average Nigerian is price-sensitive, making them susceptible to purchasing low-quality products just because they are pricey.

“An unfortunate part of doing business in Nigeria is that most people look at price first, and that should be the last thing to consider before buying a product.

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In a 2024 half-year report by the Manufacturing Association of Nigeria (MAN), the inventory of unsold goods surged by 87 percent to N2.14 trillion on sluggish consumer demand and overproduction.

On his part, Olusola Obadimu, director general of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), called for the prioritisation of small and medium-scale enterprises (SMEs).

He emphasised that they are the bedrock of every thriving nation.

“We need to move away from momentous support from the government to reinstating policies that are visionary and strong enough to drive change and development,” he said.

“It’s not just about taxes on the surface; truancy is essential,” he added. “There must be repercussions for bad behaviour at all levels of the government.”

According to him, despite how the CBN cuts the MPR rates, if inflationary pressure is high, it will still not make a difference.

“Inflation remains a problem for both individuals and businesses. Businesses have to deal with price changes every day. How can they then remain sustainable?”

Obadimu called on the government to reduce the export tax. “If we can do that, we can drive impact. The problem is that Nigeria is not focused on development, hence the epileptic policies.”

Added to multiple taxes, the experts disclosed that manufacturers are also faced with a low power supply that has spiked their operation cost in the last three years.

Data shows that manufacturers spent over N1 trillion on alternative power sources in 2024, up 42 percent from 2023.

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“A lot of machines that manufacturers use were designed in a way that they have to run 24 hours a day, seven days a week,” he explained.

“Once it is shut down, for one to restart running that machine, it takes a lot in terms of costs and manpower,” said Esther Williams, director and procurement officer, Williams Dobo Group Limited, on the effect of poor electricity supply.”

According to the National Bureau of Statistics (NBS), growth in Nigeria’s manufacturing sector slowed to 1.38 percent in 2024 from 1.40 percent recorded in 2023 due to multiple challenges.

Adetunji Aderinto, Founder, Zetomind Consulting Limited, said local manufacturers were not utilising available data, which, according to him, is limiting exponential growth in the sector.