MAN questions sustainability of FG’s 6-month VAT waiver on diesel

By Cynthia Ezekwe.

The Manufacturers Association of Nigeria (MAN) says the six months time frame set for the waiver of  7.5 percent Value Added Tax (VAT) on Automotive Gas Oil (AGO), commonly called diesel, by the federal government will not bring sustainable and effective solutions to the country’s economic challenges.

Mohammed Idris, the  information and national orientation minister, in a meeting between government officials and labour unions over the latter’s planned industrial action,  earlier stated that  VAT on diesel will be waived for the next six months,  as part of the resolutions reached during the meeting with organised labour in Abuja.

Commenting on the development, Segun Ajayi-Kadir, director general, MAN,  noted that manufacturers have always advocated for the removal of VAT on diesel which had become a key input in production processes owing to unreliable power supply.

However, Ajayi-Kadir, expressed displeasure over the timeframe, stating that the six month period will not bring sustainable and effective solution.

“Is it meant to be a stop-gap measure before a more sustainable and effective solution is enlisted? Are we likely to have a succeeding measure that will bring a more permanent and impactful remedy? I assume this will be part of the conversation that the joint committee to be set up will consider,’’ he said.

Ajayi-Kadir admitted that the federal government’s  planned 7.5 per cent VAT waiver on diesel, is a positive outcome, as it has formed part of the rapprochement that MAN and the other members of the Organised Private Sector of Nigeria (OPSN) have sought.

According to the MAN DG, the association had previously called on the government and labour to use their best endeavours to find common grounds and avoid plunging the economy into a serious crisis, considering that the manufacturing sector in particular, is operating on the brink of a recession.

Ajayi-Kadir noted that MAN had stridently advocated for the removal of VAT on diesel, especially because it has actually become a major input in the production process of manufacturing firms.

“We rely on diesel to power our machines and meet our energy needs in the face of abysmal power supply from the national grid. You are also aware that the prices have gone above N1000 per litre,’’ he added.

Ajayi-Kadir agreed that removing VAT will help reduce the cost of production input and  transportation for logistics and movement of people generally, while bringing relief to workers and the economy, but suggested it has to be implemented beyond the six-month period to have any significant impact on the economy.