The Manufacturers Association of Nigeria (MAN) has expressed grave concerns over the implementation of certain provisions of the Financial Reporting Council of Nigeria (Amendment) act, particularly those relating to charges on non-listed entities, like most members of MAN.

The Director-General of MAN, Segun Ajayi-Kadir, said that these provisions, as currently implemented, pose significant challenges to the manufacturing companies, the majority of whom are non-listed entities and are categorized under the current definition of Public Interest Entities (PIEs) of the said Act.

For instance, a new section 33 introduced under the FRCN Amendment Act, 2023 mandates annual charges for non-listed entities, calculated as a percentage of their annual turnover (maximum being 0.05% of the annual turnover for companies with turnover of more than N10 billion).

For publicly quoted companies, the maximum payment earlier was N1 million per annum. Now, that amount is hiked to N25 million!

Quite incredibly, for non-listed companies, who were previously excluded, there is no cap, and it is linked to the turnover, irrespective of whether the company is profitable or not.

The FRCN Amendment Act, 2023, Section 33 Clause 3, imposes heavy penalties on a person or an entity failing to pay annual dues with 10% of the annual due for every month of default cumulatively until payment, liable to sanctions prescribed by the Council for any default of its agents, officer or personnel engaged in the financial reporting process for failure to comply with the provision of the act and in case of chief executive officer to a penalty as may be prescribed by the Council, or on conviction to imprisonment for a term not exceeding 6 months.

The strict penalties and possible conviction to imprisonment could be construed as having the nature of a criminal law. Generally, non-payment of fees/dues typically results in other penalties or fines, and imprisonment provisions are applicable only in cases where non-payment is seen as an act of defiance or fraud.

The Section 34 of the Principle Act stipulates that the proceeds of the Fund established under Section 33 of the Act is to be applied for the expenditures of the Council, which incentivizes excessive generation of revenue and makes collection of the fees purely for administrative purposes.

Criminalizing non-payment of dues/fees, the utilization of which is more administrative in nature, makes the FRNC Amendment Act, 2023 a draconian law with no choice left for the entities to contest the charge, but to comply and pay the dues.

Ajayi-Kadir further posits that this is a direct assault on the government’s commitment to ease of doing business.

Apart from the reservations against its application to private companies, the astronomical increase for listed companies, the excessive charge on non-listed companies turnover, particularly for loss-making companies, and the commencement of implementation at this difficult time for manufacturers and other businesses amounts to yet another form of aggravated tyranny of regulation.

The investments in the productive sector of the economy will be negatively impacted if the continued implementation of this annual charge and the strenuous efforts of FRCN to execute the same are not halted. 

MAN, therefore, implores the  FRCN to be mindful of the potential negative impact of its continued administration of the fees on businesses and put it on hold.

As the umbrella body for manufacturers in Nigeria, we admonish the FRCN to await the enactment of the tax reform laws and realign its operations with the relevant provisions.

Urgent consideration and swift action from the government are needed to avert the unpleasant consequences of this annual fee. This will bring relief to anxious and long-suffering manufacturers and other business owners.

Quite importantly, it will boost our commitment to ease of doing and align with the broader objectives of the fiscal policy and tax reforms agenda of President Tinubu, which is primarily aimed at streamlining regulatory requirements, harmonizing taxes and revenue collection agencies, promoting business growth and cultivating a competitive landscape.