Former Minister of Finance and Chairman of the Economic Management Team, Olusegun Aganga, yesterday called on the President Tinubu to declare the industrial sector a national priority.
He made this call at the 3rd Adeola Odutola Annual Lecture held in Lagos, yesterday as part of the 51st Annual General Meeting (AGM) of Manufacturers Association of Nigeria (MAN).
Aganga, who was also the former Managing Director of Goldman Sachs, London, was Guest Speaker at the Lecture themed ‘Setting the Agenda for Competitive Manufacturing under the African Continental Free Trade Area Agreement (AfCFTA): What Nigeria needs to do.’
“This is the time to be bold, a time to act,” Aganga said, adding that such declaration by the government should be backed up with plans, policies and money.
Justifying his call for prioritisation of the industrial sector, Aganga said “History has shown that industry multiplies national wealth, creates jobs, is critical for exchange rate and balance of payment management and would make the Naira stronger.”
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He also questioned the wisdom in spending billions defending the Naira when it continues to fall instead of investing in genuine manufacturers and exporters of high-value products that would earn Nigeria foreign income and more.
According to him, the Naira will continue to be weak if Nigeria remains an import-dependent country and does not produce for local production and more importantly, for export.
“Unlike the trillions spent on subsidies, bailouts, the agric Anchor Borrowers Programme (ABP), the refineries, I can assure you that every Naira, no matter how large, that is well spent on strategic industrial sectors can be easily recovered and will deliver tremendous benefits to the economy and the nation,” he said, adding that embracing competition under the AfCFTA was crucial for Nigeria’s economic growth and integration into the global marketplace.
The AfCFTA came into effect on January 1, 2021, and has created the largest free trade area in the world, covering 54 African countries and a combined population of over 1, billion people.
Aganga said Nigeria may not be able to compete with China now, but by investing in infrastructure, innovation and skilled labour, while addressing trade barriers, the business environment and promoting market access, the country can certainly position itself as the manufacturing hub in Africa.
“The road to competitive manufacturing under the AfCFTA may be challenging, but with dedication, determination, and adaptability, we can pave the way for a thriving Nigerian manufacturing sector,” he stated.
Aganga, however, regretted that Nigeria’s major hurdle on the road to competitive manufacturing is not plans, rather it is poor implementation. “We are long on plans but short on implementation,” he said
While pointing out, for instance, that Nigeria launched its industrial plan in 2014, commenced its implementation and then put it on hold for eight years, Aganga said “If the plan had been implemented rigorously, Nigeria would have become a top competitive global exporter in at least three or four of the 13 products identified for export by now.”
He also said poor policy implementation was responsible for the less than sterling performance of Nigeria’s strategic use of special economic zones or industrial cities, which were at the heart of China’s economic and industrial revolution.
According to him, Nigeria adopted this same policy a few decades ago, creating NEPZA and the Onne Oil and Gas Free Zone Authority. It also licensed 30 free trade zones. He, however, regretted that only about five set up by the private sector are considered to have been successful or partially successful.
Aganga listed other viable policy options to drive the competitiveness of the manufacturing sector under the AfCFTA to include revitalizing the National Competitiveness Council, to ensure issues affecting competitiveness are identified and addressed; reconstituting the National MSME Council.
Earlier in his welcome address, MAN President Otunba Francis Meshioye highlighted some of the critical challenges hurting the manufacturing sector’s competitiveness, including multiple taxation, high cost of fund and inadequate infrastructure particularly poor electricity supply. Other challenges impacting negatively on the sectors and limiting its competitiveness, according to him, include insecurity, shortage of forex and naira depreciation.
The MAN President lamented, for instance, that manufacturers in Nigeria are forced to pay over 30 taxes by various tiers of government and its agencies. He also said at 26 per cent, cost of borrowing from commercial banks was too high.
However, the Federal Government has assured corporate organisations that it will not increase or introduce new taxes in order to meet the 18 per cent tax-to-GDP ratio as proposed.
The Acting Chairman of the Federal Inland Revenue Service (FIRS), Zacch Adedeji, gave the assurance when he met with representatives of large tax-paying companies.
In a statement from the FIRS signed by Dare Adekanmbi, Special Adviser on Media and Communication to the Acting Executive Chairman, FIRS, Zaccheus Adedeji emphasised that the President Bola Tinubu-led administration is determined to create a favourable environment for businesses to flourish.
He added that the FIRS aims to achieve an eight percent raise in tax-to-GDP ratio in the next three years to surpass Africa’s average of 16.5 percent without stifling investment or economic growth.
The plan to increase tax-to-GDP ratio to 18 percent had initially triggered concerns among corporate entities that the decision could cause an increase in tax rates or the introduction of new ones.
However, Adedeji noted that the FIRS only wants to use data to improve compliance and that the goal is to grow tax revenue by taxing prosperity and not poverty.
Adedeji also lauded the invited companies for their commitment to upholding high tax compliance standards and responsible corporate citizenship, urging them to continue to discharge their tax obligation diligently.
The Acting FIRS boss stated that “our plan is simple. We want to grow tax revenue and we only want to tax prosperity and not poverty. Therefore, it is not in our interest to kill the trees that bear the fruits. My first ‘love letter’ to you is to appreciate what you have done. So, you don’t have anything to be afraid of.
“We will not collect what is not due to us. But we don’t want anyone not to pay what is due to us. Fair engagement is our plan. Rest assured that the 18% tax-to-GDP target will not translate to increase in taxes.
“We are not unmindful of the challenges facing businesses in Nigeria with the ongoing reforms to improve economic performance. These are painful but necessary choices we must make as a nation to attain our full potential,” he said.
