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Tag: Tax exemptions

  • Stakeholders seek tax exemptions for small businesses

    Stakeholders seek tax exemptions for small businesses

    •Decry effect of multiple taxation, poor power supply others on small businesses

    Some stakeholders have called for tax exemptions for small businesses in the country to grow the economy.

    They also lamented the effect of multiple taxation, poor power supply and high production costs on small and medium-scale manufacturers in Nigeria.

    Some of them spoke in an interview during the official commissioning of LA Spring Bottle Water factory and the touring of the facility in Karu, Nasarawa State.

    Speaking in an interview, Barrister Bassey Offiong, commended the founders of the factory for their bold step in venturing into manufacturing.

    Offiong stated: “This is what we need in Nigeria to move forward. Everybody talks about moving from consumption to production. This is what production looks like.

    “It takes a lion’s heart to go into this kind of business. Most people would rather invest in real estate or hospitality where returns are quicker. But production is what truly grows the economy.”

    Offiong urged the Federal and State governments to consider reducing the cost of doing business for local manufacturers.

    “You saw how the power went out during our tour. That means extra cost to run generators. In the end, this cost is passed to the consumer, making local products more expensive than imports. If the water were imported from China, it might even be cheaper, and that is a shame,” he said.

    The lawyer, who spoke on the recent tax policies signed into law by President Bola Tinubu, warned against stifling new businesses with excessive levies.

    He added: “In developed countries, factories like this get tax exemptions for up to five years so they can stabilise. But here, barely six months in, local and state tax agents will start knocking. This is not right. Multiple taxation must stop. The government should allow small businesses to breathe and grow.”

    Also speaking in an interview, Manager of the factory, Titus Jeremiah assured of the quality of the products produced from the factory.

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    He stated: “Our water is clean, colorless, odorless, and thoroughly filtered. The regulatory authorities have come, assessed our machines and our process, and found that we meet the required standards. They didn’t find anything bad.

    “We don’t intend to drop our standards after today. We’re committed to maintaining quality and ensuring that every bottle that leaves this facility meets the expectations of consumers. The whole idea is to ensure people have access to safe and affordable drinking water, and that’s a responsibility we take seriously.”

    Also speaking, Tom Takpatore, expressed concern over the tough realities businesses face in the country.

    According to him, there is a need to improve power supply in the country so that businesses can thrive.

    “As we were going through the facility, the electricity went off. This is a business that solar power can’t sustain because the machines consume a lot. We need a reliable power supply.

    “Also, if there was an enabling economic environment, perhaps we could even produce these machines locally,” he added.

  • Tax exemptions to propel local production of medicines

    Tax exemptions to propel local production of medicines

    President Bola Tinubu has made a pivotal move to alleviate production costs for essential medical supplies by signing an executive order that suspends import duties and VAT. This landmark initiative is poised to revolutionize Nigeria’s pharmaceutical and medical device industry, bolstering local manufacturing and reducing reliance on imported goods. Associate Editor ADEKUNLE YUSUF reports

    In a ground-breaking move to alleviate the high costs of producing essential medical supplies locally, President Bola Tinubu has signed an executive order suspending import duties and value-added tax (VAT) on crucial medical imports. This initiative is set to revolutionize the pharmaceutical and medical device industry in Nigeria, offering a significant boost to local manufacturing and reducing the reliance on imported medical products.

    Announced by Prof. Muhammad Ali Pate, the Minister of Health and Social Welfare, the executive order aims to ease the financial burden on local manufacturers of pharmaceuticals, diagnostics and medical devices. Prof. Pate highlighted that the Minister of Justice and Attorney General of the Federation is expected to take the necessary steps to codify the new order. “The order is pivotal to the success of the Initiative for Unlocking the Health Care Value Chain, which was approved in October 2023 by the President,” Pate stated. “It introduces zero tariffs, excise duties, and VAT on specified machinery, equipment, and raw materials, aiming to reduce production costs and enhance our local manufacturers’ competitiveness.”

    Key components of the order

    The executive order targets a range of specified items crucial for the manufacturing of health products. These include active pharmaceutical ingredients (APIs), excipients, and other essential raw materials necessary for producing drugs, syringes, needles, long-lasting insecticidal nets, and rapid diagnostic kits. In addition to tax and duty exemptions, the order establishes market-shaping mechanisms such as framework contracts and volume guarantees to encourage local manufacturers. These mechanisms are designed to provide stability and predictability, fostering an environment conducive to investment and growth in the healthcare sector.

    The order mandates collaboration between the Ministers of Health, Finance, and Industry, Trade and Investment to develop a harmonized implementation framework. This collaborative effort aims to expedite regulatory approvals and reduce bureaucratic bottlenecks that have historically hampered progress in the healthcare industry. Key agencies, including the Nigeria Customs Service, National Agency for Food and Drug Administration and Control (NAFDAC), Standards Organisation of Nigeria, and Federal Inland Revenue Service, will be tasked with ensuring swift implementation. Special waivers and exemptions under this order will be effective for two years, providing a critical window for local manufacturers to establish and expand their operations.

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    Economic and industrial benefits

    “The implication of this order is a pivot towards market-based incentives to encourage medical industrialisation,” Pate explained. “It aims to reduce the costs of medical products through import substitution over time, create and retain economic value, and enable job creation in the healthcare value chain.”

    By reducing the financial barriers to local production, the executive order is expected to drive significant economic benefits, including increased job opportunities and the retention of economic value within the country. It also positions Nigeria to become more self-sufficient in the production of essential medical supplies, reducing dependency on international markets and improving the resilience of the healthcare system.

    As Nigeria moves forward with this ambitious plan, the focus will be on ensuring effective implementation and maximizing the benefits of the new policies. The government’s commitment to continuous improvement and innovation in the healthcare sector is evident, and this executive order marks a significant milestone in the journey towards a more robust and self-reliant healthcare system. President Tinubu’s executive order not only addresses immediate challenges but also lays the foundation for long-term growth and sustainability in Nigeria’s healthcare sector. By prioritizing local manufacturing and reducing costs, this initiative promises to enhance the overall healthcare landscape, ensuring better access to medical supplies and improving health outcomes for all Nigerians.

    Commendations galore

    President Tinubu’s recent executive order to suspend import duties and value-added tax (VAT) on essential medical supplies has garnered widespread praise, particularly from stakeholders in the healthcare sector. Among the commendations is that from Adewale Oladigbolu, the National Chairman of the Association of Community Pharmacists of Nigeria (ACPN), who hailed the order as a welcome development and a significant step in the right direction.

    Oladigbolu highlighted the potential benefits of the executive order, noting its promise to alleviate the high costs associated with locally producing pharmaceuticals, diagnostics, and medical devices. “This is a welcome development and a step in the right direction,” he said, reflecting the general sentiment of optimism within the pharmaceutical community. Despite his praise, Oladigbolu expressed concerns about the sustainability of the two-year limit set for the tax and duty exemptions. He pointed out that the implementation process, combined with the months required for shipping, could significantly reduce the effective period of the order. “By the time the order is fully implemented, and considering the shipping duration, it might expire, leading to a return to the status quo,” Oladigbolu warned.

    To ensure the long-term success of this initiative, Oladigbolu called on the Federal Government to offer additional support to the pharmaceutical industry. He advocated for grants to help local pharmaceutical companies grow and suggested closing down the open drug market to ensure a more regulated and supportive environment for legitimate businesses. “Offering grants to pharmaceutical industries and shutting down the open drug market are crucial steps to ensure growth in the sector,” he emphasized.

    The Nigeria Employers Consultative Association (NECA) has also praised the new executive order eliminating tariffs, excise duties, and value-added tax (VAT) on pharmaceutical raw materials, machinery, and equipment. NECA’s Director-General, Mr. Adewale-Smatt Oyerinde, emphasised the potential of this order to rejuvenate the struggling pharmaceutical sector and urged for its prompt and effective implementation.

    In a statement, Mr. Oyerinde highlighted the significance of the executive order, noting its potential to alleviate the severe cost challenges faced by the pharmaceutical industry. “This sector can now breathe,” he said, underscoring the relief the order brings. He called for a swift execution of the order to provide immediate relief from the current cost pressures and allow the sector to rebound. According to NECA, the executive order introduces zero tariffs, excise duties, and VAT on specific pharmaceutical raw materials and specialised machinery. This move is expected to boost the production of essential healthcare products in the economy. NECA explained, “The executive order comes at a time when local pharmaceutical companies are grappling with an acute shortage of productive raw materials, high production costs, and low output due to the high cost of importing productive machinery and other input materials.”

    Mr. Oyerinde noted that about 50 percent of raw materials used in the pharmaceutical sector are imported. The high cost of these imports, exacerbated by the depreciation of the Naira and associated clearing charges, has significantly inflated production costs and pharmaceutical product prices. This has led to increased inventories of unsold goods and a minimal contribution to the GDP. According to the National Bureau of Statistics (NBS), the sector contributed only 0.25 percent and 0.26 percent to real GDP in 2022 and 2023, respectively, while the inventory of unsold pharmaceutical products stood at N79 billion in 2022.

    Mr. Oyerinde stressed the importance of timely and thorough implementation of the executive order to avoid the pitfalls that have plagued previous orders. “Deft monitoring and engagement with stakeholders are crucial to ensuring the successful implementation of the order,” he said. “We hope that greater efforts will be put into making this new order work for the benefit of the industry and Nigerians in general.”

    NECA’s commendation of President Tinubu’s executive order reflects the association’s optimism about the potential benefits for the pharmaceutical sector. The prompt and efficient implementation of this order could mark a turning point, providing much-needed relief and paving the way for a more robust and competitive local pharmaceutical industry. As the sector looks forward to these changes, the focus will remain on ensuring that the order is executed effectively, bringing about the intended economic and health benefits for Nigeria. As the healthcare sector rallies behind President Tinubu’s executive order, the focus will be on addressing the concerns raised and ensuring effective and timely implementation. The potential for this order to transform the pharmaceutical landscape in Nigeria is significant, but it will require sustained support and strategic planning to achieve lasting impact. By addressing the challenges and building on the momentum of this executive order, Nigeria can look forward to a more robust and self-sufficient healthcare system, ultimately improving health outcomes for its population.