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Nigerian manufacturers worry national debt, tax could hurt economic growth

Published

1 year ago

August 22, 2023

Nigerian Manufacturers Association (MAN) has warned that the country’s debt burden will likely affect economic growth under President Bola Tinubu.

According to the the body’s CEOs’ Confidence Index (MCCI) first quarter 2023 (Q1’23), “The domino effects of escalating public debt on the manufacturing sector are endless”.

Nigeria’s debt profile rose by 410 percent in the last 8 years. In March, Nigeria’s Debt Management Office (DMO) revealed that the country’s total public debt rose to 46.25 trillion naira ($103.1 billion) in 2022.

The rise was from 39.56 trillion naira in the year 2021, as the government ramped up borrowing to fund its budget deficit.

The MAN’s index report further revealed that the “rising domestic debt is highly crowding out private investment in the manufacturing sector by reducing credit availability and forcing hike in lending rates”.

The manufacturers also stressed how the debt situation had affected the availability of foreign currencies for their industry to stimulate production and national economy.

“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.

“Moreover, higher debt servicing is consuming greater volume of forex and worsening the forex scarcity that has plagued the manufacturing 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”.

Nigeria’s public finance is currently affected by dwindling oil prices and industrial-scale crude oil theft and what used to be the high amount expended on fuel subsidies.

With fuel subsidy out of the equation from the first day of his administration, it is yet to be seen how President Tinubu will better the country’s economic lot in the shortest space of time.

A likely option is the tax system but there are already existing fears around taxation in the country. So much that MAN stressed that “contrary to the popular parlance in the government quarters that Nigeria has revenue problem, 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”.

Related Topics:Featured Manufacturer Nigeria

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IMF mission concludes 4th loan program assessment in Egypt

Published

12 hours ago

November 22, 2024

Ifeoluwa Dada

Following the completion of a recent visit to Egypt, the International Monetary Fund (IMF) has announced that its mission had achieved significant strides in policy talks aimed at concluding the fourth review of the IMF loan program.

The review is the fourth in Egypt’s most recent 46-month IMF loan program, which was authorised in 2022 and increased to $8 billion this year following an economic crisis characterised by high inflation and chronic foreign exchange shortages. It may unleash more than $1.2 billion in financing.

Along with reaffirming its commitment to maintain a flexible exchange rate system, the IMF stated that Egypt “has implemented key reforms to preserve macroeconomic stability,” including the unification of the currency rate that facilitated imports.

Earlier on Wednesday, Egypt’s Prime Minister Mostafa Madbouly said Cairo has asked the IMF to modify the targets for the programme not only for this year, but for its full duration, he added without giving more details.

“Discussions will continue over the coming days to finalize agreement on the remaining policies and reforms that could support the completion of the fourth review,” the IMF added in its statement.

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Kenya seeks $750m from World Bank, obtains $200m from AfDB— Official

Published

2 days ago

November 20, 2024

Ifeoluwa Dada

The head of debt management for the finance ministry told Reuters that Kenya had obtained a $200 million loan from the African Development Bank (AfDB) and was negotiating a fresh $750 million loan with the World Bank.

After being forced to abandon proposed tax rises costing more than 346 billion shillings ($2.68 billion) in June due to fatal demonstrations, the East African nation’s administration, which has been grappling with significant debt, has been frantically seeking fresh funding.

The Finance Ministry’s public debt management office director general, Raphael Owino, told Reuters that the IMF’s October clearance of the seventh and eighth reviews, which opened the door for a $606 million loan tranche, had aided the ministry’s talks for more loans.

“The World Bank is coming on board, riding on the back of IMF receipts,” Owino said. “The AfDB is already on board.”

The discussions for more assistance, which came under the World Bank’s “Development Policy Operations” (DPO) with the government, were confirmed by a representative at the organization’s Kenya office.

“The amount of the current (loan) is yet to be determined. The amount will also depend on the implementation of the policy reforms agreed upon,” the spokesperson told Reuters, adding that past DPO loans averaged about $750 million.

In May, the World Bank approved the latest round of DPO loans, totalling $1.2 billion.

According to a statement made last month by Finance Minister John Mbadi, Kenya has set a foreign borrowing goal of 168 billion shillings for the fiscal year ending in June 2025.