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• Poor infrastructure, FX scarcity, credit crunch are pain points
The Manufacturers Association of Nigeria (MAN) has expressed worry over the country’s bloated debt profile, saying as of December 2022 had increased by 17 percent from the record of December 2021.
Director-General, MAN, Segun Ajayi-Kadir, lamented that in the absence of commensurate infrastructural development and significant success in poverty-reduction and industrialisation programmes, the rising debt is a source of concern to them, especially as local manufacturers remain most affected.
While domestic debt stock accounted for 59.6 per cent of the total debt, external debt stock contributed 40.4 per cent and has ballooned to over N77 trillion following the approval of the securitisation of the ways and means advances.
He added that a debt service-to-revenue ratio of over 100 per cent will spell doom for the current administration, leaving it to continue the borrowing spree or incapacitated to provide critical infrastructure needed to boost the manufacturing sector and kick-startovery of the economy.
He regretted that the rising domestic debt is crowding out private investments in the manufacturing sector by reducing credit availability and forcing a hike in lending rates. External debts are mostly serviced in foreign currencies, hence high demand for foreign currencies further depreciates the Naira and makes importation of non-locally produced critical inputs highly expensive for manufacturers, he said.
“Moreover, higher debt servicing is consuming greater volume of forex and worsening its scarcity that has plagued this sector for many years. Higher debt repayment requires increased revenue. The Nigerian government has continued to breed a harsh business environment by its indiscriminate imposition of high and multiple taxes on manufacturers all in a bid to generate revenue. Huge public debt has led to low foreign investment and foreign capital inflow, which worsen the FX scarcity that has remained a bone in our throats.”
He added that as public debt continues to grow, it is more difficult to cover salary payments and other recurrent expenditures, which means more borrowing for government consumption or recurrent expenditure and less on infrastructure and other capital projects.
“The country’s debt crisis is not a result of inadequate revenue and it is anti-growth to view manufacturing taxes as the last resort for curbing the debt problem. Infrastructure decadence, FX scarcity, credit crunch and naira depreciation have become bones in our throats despite the humongous increase of over 410 per cent in the country’s debt profile in the last eight years,” he said.
He said the problem is not revenue generation or collection but the siphonage of collected revenue, which do not reflect in official records.
The MAN DG advised the government to immediately increase revenue base by widening the tax net through an enhanced data capture of business operators in the informal sector, strictly implement the Voluntary Assets and Income Declaration Scheme (VAIDS) through the Federal Inland Revenue Service (FIRS), identify and amend loopholes in the tax laws in order to reduce the leakage of tax revenues, promote fiscal discipline by reducing the cost of governance and strictly complying with section 41 of the Fiscal Responsibility Act and section 38 (sub-section 2) of the CBN Act and ensure the rehabilitation of local refineries and remove the humongous annual subsidy in phases while ensuring they are backed with appropriate palliatives for households and businesses.
He further urged the government to ensure the proactive judicial investigation into allegations of oil theft and stamp duty fraud, embark on mechanisms that promote coordination and confidence among creditors to be granted the opportunity for debt restructuring, prioritise debt management and transparency to control risks and reduce the need for restructuring, which stands to benefit both debtors and creditors, ensure proper management of capital and recurrent expenditure by determining the appropriate spending priorities that reflect the yearnings and aspirations of households and businesses within the limits of available resources and establish incorruptible monitoring teams tasked to ensure effective budget implementation and detailed evaluation of budget performance.
Other suggestions proffered include setting up a special court and reinvigorating the anti-graft agencies to strengthen the fight against corruption, promote transparency and productivity in government expenditure by ensuring public funds are expended on feasible development projects to minimize wastage, optimise the capability of the states to generate internal revenue given the abundant natural and human resources, diversify the country’s revenue base by boosting critical sectors like manufacturing, agriculture, entertainment, tourism and ICT and prioritise and incentivise critical sectors with low-interest rates and improved infrastructure to enhance investment and productivity.
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