Manufacturers query FG’s 6months VAT waiver on diesel

The Manufacturers Association of Nigeria (MAN) has commended the waiver of the 7.5 percent Value Added Tax (VAT) on Automotive Gas Oil (AGO), commonly called diesel, by the Federal Government (FG) but questioned the rationale behind the six months timeframe set for the waiver.

Director General, MAN, Segun Ajayi-Kadir, in a chat with Vanguard, noted that manufacturers have always advocated for the removal of VAT on diesel which had become a key input in production process owing to unreliable power supply.

His words: “The federal government’s announcement of waiver of the 7.5 percent VAT on AGO, commonly called diesel, as part of the agreements with the labour unions is a positive outcome.

“It is good to note that it has formed part of the rapprochement that MAN and the other members of the Organised Private Sector of Nigeria (OPSN) have sought.

“We had called on the government and labour to use their best endeavors to find common grounds and avoid plunging the economy into a serious crisis. We already have enough challenges and the manufacturing sector in particular, is operating on the brink of a recession.

“You would also recall that MAN had stridently advocated for the removal of VAT on diesel, especially because it has actually become a major “input” into our production process. 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 liter.

“Meanwhile, it is said that diesel is used to fuel about 90 percent of the haulage trucks that transport petrol from the depots to retail outlets nationwide.

“So, removing VAT will help reduce the cost as a production input and cost of transportation for logistics and movement of people generally. It should bring relief to workers and the economy.

“However, one is concerned that it is meant to be for a period of six months. I have not seen the assumptions behind such a timeframe. 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.”