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, majority of whom are non-listed entities and are categorised under current definition of Public Interest Entities (PIEs) of the said Act.
MAN admonished FRCN to be mindful of the potential negative impact of its continued administration of the fees on businesses and put it on hold, urging the FRCN to await the enactments of the tax reform laws and realign its operations with the relevant provisions.
Part of the statement read; “a new section 33 introduced under 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 if 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.”
Account to the Manufacturers’ group, 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.
The group argued that criminalizing non-payment of dues/fees, the utilization of which is more administrative in nature, makes the FRCN 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 posited 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; the commencement of implementation at this difficult time for manufacturers and other businesses amount to yet another form of aggravated tyranny of regulation.
The investments of 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 same is not halted.
MAN demands urgent consideration and swift action of government is needed to avert the unpleasant consequences of this annual fee, adding that it will bring relief to anxious and long suffering manufacturers and other business owners.
