The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, disclosed on Monday that the Federal Government has infused palliatives worth N1 trillion into the manufacturing sector over the past year.
This significant financial injection aims to rejuvenate the sector, which is already witnessing positive outcomes.
Additionally, the Chairman of the Federal Inland Revenue Service (FIRS), Mr. Zacch Adedeji, highlighted that an accelerated stabilization fund, focused on revitalizing the manufacturing sector, is being allocated alongside a series of legacy projects designed to enhance infrastructure and make the sector more viable.
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These announcements were made during an interactive session on the Finance Act (Amendment) Bill 2024, organized by Senator Sani Musa (APC Niger East) and the National Assembly’s joint committee on Finance.
In response to the Committee’s request to consider the manufacturing sector as a beneficiary of the proposed tax on bank foreign profits (windfall tax), Edun affirmed that the sector has already been substantially supported. He stated, “Palliatives worth N1 trillion have been injected into the manufacturing sector within the last year, with attendant positive results in terms of reinvigoration.”
Adedeji elaborated on the strategic programs of the President Bola Tinubu-led federal government, noting their focus on revitalizing the manufacturing sector. He explained that the proposed one-time windfall tax is intended to redistribute wealth, benefiting various sectors.
Adedeji highlighted the accelerated stabilization funds and legacy projects aimed at making the manufacturing sector more vibrant and viable.
He mentioned specific infrastructure projects such as the Badagry-Sokoto Highway, which would reduce travel time between Badagry and Sokoto to 11 hours, and the Lagos-Calabar Coaster Highway, enhancing connectivity and supporting the manufacturing sector’s growth.
“Also, the Lagos-Calabar Coaster Highway is another strategic road infrastructural project that will bring about the required connectivity for reinvigorating the manufacturing sector.
“The plan of President Bola Tinubu on the economy, manufacturing sector, and development generally is very robust,” he said.
The Windfall Tax Proposal
The sharing of the one-time windfall tax between the federal government and banks remains a point of contention. President Tinubu’s executive bill proposed a 50% sharing formula for both parties. However, some committee members suggested an upward revision to about 70%.
Concerns Over the Windfall Tax
Economists and stakeholders have expressed concerns about the potential negative consequences of the proposed windfall tax. They argue that the unpredictability and retroactive nature of the tax could deter future investments, both foreign and local.
Investors typically seek stable and predictable environments, and any perception of fiscal unpredictability can lead to capital flight and reduced investment inflows.
Analysts have warned that the proposed tax could destabilize financial markets by introducing uncertainty and reducing investor confidence. Banks and other financial institutions may face challenges in planning and managing their finances, leading to broader economic instability.
Nigeria’s economy is already battered by various challenges, including declining oil revenues, high inflation, and significant unemployment rates. The economy, heavily reliant on oil exports, has struggled with fluctuations in global oil prices, reducing foreign exchange earnings and straining public finances.
Given this fragile economic state, economic experts have cautioned the government against implementing policies and moves that could further deflate investor confidence. The consensus among experts is that any policy perceived as unpredictable or punitive could exacerbate the country’s economic woes.
They warned that the windfall tax if not carefully implemented, could finish off the already weakened economy. The warning stresses the importance of maintaining investor confidence, which is crucial for attracting both domestic and foreign investments needed to spur economic growth and development.