Manufacturing stakeholders have told Nairametrics that the waiver on diesel value-added tax (VAT) though good, is only a short-term relief, especially for manufacturers who are reliant on the commodity.
Ambrose Oruche who is a Director at the Manufacturers Association of Nigeria (MAN), told Nairametrics that there has been no official response from the association yet.
He however noted that VAT is currently 7.5%, hence, the immediate impact will be that the pronouncement will reduce the cost of diesel by 7.5%.
According to him, a 7.5% reduction will go a long way in reducing the cost of production; but the main issue is that the cost of diesel at N1,000 in most filling stations is high.
Remove taxes on energy products
The chief executive of the Center for the Promotion of Private Enterprise, and former Director General of Lagos Chamber of Commerce and Industry, Dr. Muda Yusuf, said the suspension of VAT will have some impact on manufacturing because no matter how little, whatever the government can do to bring down the cost of energy should be done. He said he expected that to be done long before Organized Labour asked for it.
He said:
- “It is a good thing that VAT on diesel has been suspended. And if you ask me, I think they should go further. Any other charges on diesel by any agency of government should be removed to bring down energy costs.
- “The same goes with food. I am not saying that they should open the floodgates of food importation, but anything that has to do with food production, food processing and whatever taxes that increase the prices of food items should be removed for now so that the citizens can have some breathing space.
- “The labour unions are not talking much about taxes and other fiscal policies as forms of palliative. They should be talking about the removal of import duty on some of our energy needs such as compressed natural gas, solar panels and other energy sources; but they are not talking about such things.”
He stressed that with the removal of some of the taxes on energy products, Nigerians may be able to find solutions to some of their energy deficit, no matter how small, noting that palliatives should not only be about increasing salaries.
Increase local production
Dr. Peter Jakpor, an economist, on his part, noted that a 7.5% VAT suspension merely translates to a reduction of N75 in the price of diesel, which is insignificant, because the price of diesel increases virtually on a weekly basis.
He said:
- “What good is a N75 reduction in diesel price when it may still hit the N1,000 mark next week, despite the removal of VAT on the product? The ultimate solution to solving our fuel energy needs is local production.”
What you should know
Following the Federal Government’s recent engagement with labour and trade unions, there have been announcements of a provisional wage increment of N25,000 exclusively for treasury-paid federal government workers, effective for a duration of six months.
Furthermore, the Federal Government has expressed its dedication to expediting the rollout of Compressed Natural Gas (CNG) buses. This initiative aims to alleviate the challenges in public transportation that have emerged due to the removal of the PMS (petrol) subsidy.
