MAN Demands VAT Exclusion On Diesel To Address Price Hike

The Manufacturers Association of Nigeria(MAN) has demanded the removal of Values Added Tax(VAT) on diesel to address the current price hike.

Production uncertainties and fear of survival are liming in the manufacturing sector following multiple challenges arising from inadequate electricity supply and inaccessible foreign exchange and now exponential rise in cost of diesel.

But MAN, in a reaction to the current increase in price of diesel, recalled that over the years, the sector has been battered by numerous familiar challenges that have plummeted the number of industries in Nigeria and converted industrial hubs in many parts of the country to warehouses of imported goods and event centres.

The association identified key challenges confronting the sector as; high operating cost environment occasioned largely by inadequate electricity supply and the high cost of alternative sources, excessive regulation and taxation, and inadequate supply of foreign exchange for importation of raw materials, spare parts and machinery that are locally available.

All these, it noted, have culminated into the lacklustre performance of the sector.

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Commenting on the rising cost of diesel, the director general of MAN, Segun Ajayi-Kadiri,  called for immediate removal of Value Added Tax(VAT) on Automotive Gas Oil, AGO, also called Diesel as instant stimulus for immediate reduction in price and expedite action in reactivating or privatizing the petroleum products refineries in the country.

Ajayi-Kadiri, observed that the current increase in prices of crude oil and other refined petroleum products such diesel is one of such disruptions occasioned by external shocks that confirms the interwovenness of economies in the world.

No doubt, he said, the recent short supply and over 200 per cent increase in the price of AGO are part of the backlashes from the ongoing invasion of Ukraine by Russia.

This resulted in numerous economic sanctions on Russia by the US and EU, which propped up the price of crude oil to $120 per barrel (now moderated to about $100) as Russia oil export is isolated.

He said the association was greatly concerned about the implications of the over 200 per cent increase in the price of AGO on the Nigerian economy and the manufacturing sector, adding, “more worrisome is the deafening silence from the public sector as regards the plight of manufacturers.

“Four obvious questions that readily come to mind that are seriously begging for answers are- What can we do as a nation to strengthen our economic absorbers from external shocks? Should manufacturing companies that are already battered with multiple taxes, poor access to foreign exchange and now over 200% increase in price of diesel be advised to shut down operations? should we fold our arms and allow the economy to slip into the valley of recession again? Is the nation well equipped to manage the resulting explosive inflation and unemployment rates?”

In the short term, he said, the disruption occasioned by the invasion of Ukraine by Russia will continue to heavily ruffle the global energy space and upset the supply of petroleum products thereby causing persistent increase in the price of refined petroleum products including AGO.

“In the long run, it will result in enormous increase in the prices of other manufacturing inputs like wheat, maize, fertilizers and the raw materials. By the time the current domestic reserve of manufacturing inputs is exhausted, in the face of acute shortfall in supply, we are afraid that the prices of manufactured products will soar,” he said.

To remain in business, the manufacturers demanded development of a National Response and Sustainability Strategy to address challenges emanating from the ongoing invasion of Ukraine by Russia and consistent support to manufacturing to accelerate the process of recovery from the aftermath of COVID-19 and previous bouts of recession to avert the complete shutdown of factories nationwide with multiplier effect on the employments.