In a stakeholders’ engagement recently organized by the Enugu State Internal Revenue Service, the Nigerian Employers’ Consultative Association, and other Organized Private Sector (OPS) partners, the Chairman Manufacturing Association of Nigeria (MAN) Southeast zone, Mrs Adaora Chukwudozie, made the call for a tax system that goes beyond revenue generation to one that actively drives production and economic growth.
Speaking on the theme ‘Understanding and leveraging the opportunities in Nigeria’s new tax reform’, she stressed that taxation should incentivize domestic manufacturing and value-added exports.
She pointed out that manufacturers were ready to work with the government to design a tax system that promotes not just revenue generation but also economic expansion. She ended by noting that “the success of any tax reform should be measured by increased production, job creation, and improved competitiveness of industries—not just revenue collected.”
In truth, the Tinubu administration has introduced a raft of tax reforms that while consolidating and modernizing revenue collection and also improving Nigeria’s fiscal base, they have hardly stimulated production or exports. Tax reforms that would boost production require targeted incentives, lower compliance burdens, and sector‑specific reliefs.
Examples of such incentives would include tax credits for manufacturers, export rebates, VAT exemptions on raw materials, reduced tariffs on machinery, lower corporate tax rates for agro‑processing, textiles, and industrial parks, reduced bureaucratic hurdles for SMEs and manufacturers etc. These would lower production costs, improve competitiveness, encourage the creation of local value chains, attract FDI into manufacturing and industrial parks. Such effects typically lead to large-scale employment.
Tax reform that stimulates production will ultimately be good for government and not just good for society. The large scale employment that should accrue from production minded tax reform should go a long way in reducing the size of our informal sector, which currently is roughly about 57% of GDP. More formal jobs would mean incomes that are easier to track and thus tax, and doing so in a way that is unlikely to lead to accusations of predatory taxation.
There are already stories of companies reporting squeezed margins due to rising costs and tax burdens. These ultimately affect hiring, leading companies to hire less, which reduces the size of the tax base, which might prompt government to further increase taxes and ultimately engender a vicious taxation cycle. To prevent this from happening, tax reforms must pivot from revenue collection to production stimulation.
