MAN Warn Against Tax Stamp System, Citing Global Failures and Economic Risks

The Manufacturers Association of Nigeria (MAN) has raised serious concerns over the possible introduction of a Tax Stamp System for excisable products, warning that such a move could undermine the progress achieved through the Nigeria Tax Act 2025.

In a strongly worded statement, MAN acknowledged the government’s efforts to modernize and harmonize the tax system, praising the 2025 Tax Act for simplifying tax administration and providing relief to industries—especially small and medium-sized industries (SMIs). However, the association cautioned that the proposed tax stamp initiative could reverse these gains.

While acknowledging the government’s intent to curb illicit trade and enhance transparency, MAN emphasized that global evidence—especially from emerging markets—shows tax stamp systems often backfire, imposing heavy costs on legitimate businesses while failing to eliminate smuggling or counterfeiting.

Key Concerns Raised by MAN:

– Contradiction with Tax Act 2025: The tax stamp system risks reintroducing multiple levies, effectively acting as a “hidden tax” that contradicts the relief measures of the new tax law.
– Illicit Trade Surge: High compliance costs could push manufacturers and consumers toward the informal market, increasing the circulation of illicit and counterfeit goods.
– Consumer Burden: Manufacturers may pass on the added costs to consumers, driving demand for cheaper, potentially unsafe alternatives.
– Redundancy of Existing Systems: Nigeria already has digital excise tracking tools like the B’Odogwu ERS and FIRS e-invoicing, which provide real-time visibility without the need for tax stamps.
– Competitiveness Risk: Additional costs could make Nigerian products less competitive within the African Continental Free Trade Area (AfCFTA), threatening local industry.
– Economic Fallout: The system could lead to job losses, reduced investment, and stifled innovation across the manufacturing value chain.
– Doubtful Effectiveness: International studies and past experiences suggest that tax stamps offer limited revenue gains while imposing heavy operational burdens.

International Experience with Tax Stamp Systems

African Example

– Kenya: Since 2013, Kenya’s Excisable Goods Management System (EGMS) has faced legal disputes, high compliance costs, and public resistance. Despite expanding to more products in 2019, illicit trade persists, and manufacturers report being priced out of the market.
– Tanzania: Digital stamps introduced in 2019 led to initial revenue gains but were followed by recurring costs and operational delays. Several small firms exited the market.
– Uganda: A 2024 study by PSFU and PwC confirmed high compliance costs, SME strain, and reduced competitiveness.
– Ghana (2018): Excise stamps added 5–7% to product costs with little impact on smuggling. The Ghana Revenue Authority admits challenges with diverted goods and porous borders.

Beyond Africa:
– Saudi Arabia & Gulf States: Success attributed to strong customs enforcement and government subsidies—conditions not yet present in Nigeria.
– United Kingdom: Recently reformed its outdated and inefficient stamp regime, citing its burden on businesses and lack of effectiveness.

MAN’s Recommended Position

– Reiterates commitment to excise contributions and calls for collaborative policy-making.
– Warns that tax stamps would worsen existing pressures from high energy costs, inflation, and rising excise rates.
– Urges government to reject any rollout of tax stamps until a full stakeholder engagement and impact assessment is conducted.
– Advocates reliance on existing digital systems (ERS and e-invoicing) for transparency and traceability.
– Calls for smarter alternatives: targeted border enforcement, digital traceability pilots, and risk-based audits.
– Emphasizes the need for a transparent policy framework that balances revenue goals with industrial sustainability.

– Protect the gains of the 2025 Tax Reform Acts by avoiding measures that reintroduce complexity and costs, particularly for SMIs.

– Seeks a transparent framework for policy design and implementation

In Conclusion

Director General of MAN, firmly appeal to the Federal Government:

“Tax stamps often hinder local industry, erode gains in tax simplification, and yield limited revenue impact. We implore the Government not to succumb to this proposal, but to strengthen existing digital tools and border controls to achieve compliance without imposing undue burdens on industry.”

Segun Ajayi-Kadir, mni,

Director General

Manufacturers Association of Nigeria