MAN urges Lagos to simplify tax system to boost manufacturing

Nigeria's manufacturing sector faces a critical structural challenge: tax complexity. The Manufacturers Association of Nigeria (MAN) has formally called on the Lagos State Government to streamline its tax framework, signaling growing frustration among industrial operators struggling with overlapping levies, compliance costs, and administrative friction that collectively drain competitiveness and capital.

During MAN's annual business luncheon in Lagos, branch leadership highlighted a systemic problem affecting the nation's largest industrial hub. Manufacturing—already constrained by energy costs, logistics bottlenecks, and forex volatility—must now navigate a labyrinthine tax environment where state, local government, and federal obligations intersect without clarity. For small and medium-sized enterprises (SMEs) especially, the compliance burden diverts resources from production, innovation, and job creation.

## Why Does Tax Simplification Matter for Nigerian Manufacturing?

Nigeria's manufacturing sector contributes roughly 9% of GDP and employs over 1.5 million people, yet operates at only 35–40% capacity utilization. High operational costs—including multiple redundant tax filings, delayed refunds, and arbitrary assessments—push manufacturers toward informal channels or relocation to neighboring countries with clearer, lower-cost regimes. A simplified tax structure would reduce administrative overhead, accelerate business registration cycles, and signal investor confidence, directly lowering the cost of doing business in Lagos.

MAN's appeal reflects a deeper economic reality: **tax complexity is an invisible export tariff**. When manufacturers spend weeks navigating filing requirements instead of hours, they lose competitive edge against regional peers in Ghana, Côte d'Ivoire, and Kenya—all aggressively courting Nigerian industrial capacity. The cost compounds: legal and accounting fees for tax compliance average 2–5% of operating expenses for mid-sized firms, a drag on margins that ultimately reduces wages, pricing flexibility, and reinvestment capacity.

## What Would Tax Simplification Look Like?

Best practice suggests a consolidated state levy, harmonized with federal frameworks, filed through a single digital portal with clear deadlines, transparent rates, and predictable assessments. Singapore, Rwanda, and the UAE demonstrate that simplicity drives manufacturing clusters. Lagos, home to 60% of Nigeria's formal manufacturing base, has the scale to pioneer such reform—creating a model for other states and positioning itself as West Africa's manufacturing capital.

The political economy matters too. Investment decisions for new plants or expansions typically account for a 5-10 year horizon. Investors comparing Lagos to Accra or Abidjan weigh not just energy and port costs, but also perceived regulatory risk and compliance burden. A clear tax code removes a major psychological barrier to committing capital to Nigeria.

## When Could Reform Realistically Happen?

The Lagos State Government has demonstrated appetite for business-friendly policy—most notably through the recent rationalization of business registration fees and digital governance initiatives. However, tax reform requires multi-stakeholder dialogue, pilot testing, and coordination across state and federal revenue authorities. A realistic timeline is 12–18 months for consultation, drafting, and legislative passage, with implementation starting in 2027.

The window is open. Global manufacturing is relocating away from China; Africa is gaining strategic attention. **Lagos cannot afford to fumble this moment through bureaucratic friction.**

---