The Manufacturers Association of Nigeria (MAN) has praised the Federal Government’s recent decision to waive the 7.5 percent Value Added Tax (VAT) on Automotive Gas Oil (AGO), commonly known as diesel. However, MAN has raised concerns about the six-month timeframe set for the waiver, questioning its rationale and long-term impact on the economy.
In a conversation with Vanguard, MAN’s Director General, Segun Ajayi-Kadir, expressed his approval of the VAT waiver, emphasizing that manufacturers have consistently advocated for the removal of VAT on diesel. This move is significant as diesel plays a vital role in the production process, especially due to the unreliable power supply in the country. Ajayi-Kadir acknowledged the positive outcome of the government’s decision, emphasizing the relief it would bring to manufacturers and the economy.
“The federal government’s announcement of the waiver of the 7.5 percent VAT on diesel is a positive outcome. We had called on the government and labor to find common ground to avoid plunging the economy into a serious crisis. The manufacturing sector is already facing challenges and operates on the brink of a recession,” said Ajayi-Kadir.
Diesel has become a crucial input for manufacturers, powering machines and meeting energy needs in the absence of a stable power supply. Moreover, diesel is essential for about 90 percent of the haulage trucks that transport petrol from depots to retail outlets nationwide. The removal of VAT on diesel is expected to reduce production costs and transportation expenses, providing relief to workers and stimulating economic activities.
However, MAN expressed concerns about the limited duration of the VAT waiver. Ajayi-Kadir raised questions about the underlying assumptions behind the six-month timeframe. “I have not seen the assumptions behind such a timeframe. Is it a stop-gap measure before a more sustainable solution is found? Will there be a succeeding measure that brings a more permanent and impactful remedy?” he pondered.
MAN anticipates that the joint committee, which will be set up to further discuss this matter, will address these concerns and work towards a more enduring solution. As the industry awaits further developments, manufacturers remain hopeful for a resolution that ensures a stable and conducive business environment.