Nigeria : Parlous infrastructure hiking operational cost, undermining tax compliance

  • 14 June 2022 / News / 428 / Fares RAHAHLIA


Nigeria :  Parlous infrastructure hiking operational cost, undermining tax compliance

The challenging operational environment has continued to assail businesses in Nigeria, especially, listed firms, as investors at the weekend renewed calls for government at all levels to pay more attention to infrastructure development and other impeding factors and boost tax compliance.

The experts, who argued that listed firms were facing untold hardship due to the harsh operating environment, noted that if the government fails to improve infrastructure and revive the manufacturing sector, companies would continue to record losses, and may not fulfil, their tax obligation.

They noted that the integrated developmental master plans needed for sustainable infrastructure development in Nigeria were yet to be executed. Therefore, they suggested that the government should review its strategies and improve opportunities for quoted companies and entrepreneurs through the provision of adequate infrastructure facilities to boost their business operations and spur their willingness to pay tax.

A cursory look at some listed firms’ financial performance showed that Honeywell Flour mills in its financial year for the period ended March 31, 2022, announced an N983.8million loss, representing a 188 per cent decline from the N1.13 billion profit reported in the full year ended March 31, 2021.

The losses were attributable to a 32.9 per cent hike in the cost of sales, which rose to N124.86 billion in 2022 from N93.97billion in 2021.

The audited results also revealed 34.8 per cent increase in Honeywell Flour mill’s raw and packaging materials consumed to N111.44 billion in 2022 compared with N82.66 billion in 2021, which contributed 89.3 per cent on the overall cost of sales in the year under review.

Also, UAC Nigeria Plc’s audited results for the full year ended December 2021`revealed a profit of N2.59 billion, representing a 33 per cent decline from the prior-year N3.9 billion.

Although the company recorded growth in sales on the back of double-digit food inflation, bottom-line profit was greatly subdued by production, and finance costs, which increased by a whopping 28 per cent and 194 per cent, respectively, during the period under review.

According to the company, performance for the period was largely affected by high costs of sales as well as selling, distribution and administrative expenses, which also affected profit as a trickle-down effect.

For Dangote Sugar Plc, its full year 2021 results revealed a profit of N22.05 billion, representing a 26 per cent decline from 2020 performance.

Although the group’s revenue increased 28.8 per cent to N276.50 billion from N214.30 billion in 2020 on the heels of a strong growth trajectory recorded in the prior quarter the company’s gross profit, however, decreased 12.3 per cent to N50.21 billion from N57.22 billion due to continued rise in the cost of production witnessed during the year under review.

The President of Issuers and Investors Alternative Dispute Resolution Initiative (IIDRI), Moses Igbrude, said mitigating challenges confronting listed firms, especially in the areas of infrastructure and access to foreign exchange should be addressed.

According to him, the government needs to do more to stabilise the economy by developing infrastructure projects like electricity, road network, water, and railway among others. He added that when businesses become stable and viable, companies could make profit and fulfill their tax obligation.

The President of the Ibadan zone Shareholders Association, Eric Akinduro, said the government must be alive to its responsibility by creating an enabling environment for listed firms to grow.

“Business owners in Nigeria are working under an unfavourable environment where they need to provide light, water, security and even good roads on their own to do business.

“All these are the government’s responsibilities. If the government should work on these, businesses will boom in Nigeria, which will translate to improve the standard of living, and people will fulfil their tax obligations with ease. It would also reduce the rate of unemployment.

Tax payment is an obligation of every citizen, but in a situation where citizens do not derive benefits or see the impact of taxes on the economy, it would affect their willingness to comply. “Government should play its role, while individuals and companies should perform their own responsibility. Government officials should stop living in flamboyance and wasting national resources to the detriment of taxpayers.”

Vice-Chairman of Highcap Securities, Imafidon Adonri, said the development of a heavy industrial base would provide the engineering infrastructure required to sustain the productive momentum of the country’s light industries.

He pointed out that the government also needs to provide world-class basic infrastructures like a good road network, rail and ports, in addition to good technical education, and good healthcare.


“The manufacturing industry has a greater capacity to create wealth and generate productive employment. It is the best means of lifting people out of poverty.

“Government can formulate several enabling policies to make production businesses thrive in Nigeria.

“This will involve full privatisation of the economy, protection of the domestic production industry, encouragement of the private sector to develop the engineering infrastructure made up of the metallurgical industry, electric power industry and the energy industry.”

Furthermore, he argued that the government’s commitment is to use the money paid by taxpayers to provide for the social and economic well-being of the citizen.According to him, if people are gainfully employed and able to meet their maintenance needs, they will be encouraged to pay tax.


source: guardian.ng

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