The Impact of Increased Tariff on Business Survival in Nigeria
The governmental policies enacted in Nigeria, like to several other emerging nations, have a substantial effect on the economic landscape. One policy that may be implemented is the introduction of taxes on imported products. Tariffs are generally implemented with the objective of safeguarding domestic businesses from foreign competition. However, it is important to acknowledge that they may sometimes give rise to unforeseen repercussions. This article aims to examine the effects of heightened tariffs on the viability of businesses in Nigeria.
The Rationale for Increased Tariffs:
The Nigerian government often employs the strategy of implementing higher tariffs in order to promote domestic manufacturing and diminish the nation’s reliance on imported commodities. The underlying justification for this approach is to safeguard domestic industry from the competitive pressures arising from less expensive imported products. The implementation of higher tariffs on imported products is anticipated to incentivize customers to shift their preferences towards domestically manufactured alternatives, thereby fostering the growth of local enterprises.
The Impact on Businesses:
Nevertheless, the intricacies surrounding the implementation of heightened tariffs are often more multifaceted. The imposition of higher tariffs may have a substantial impact on the operating expenses of enterprises that depend on imported raw materials or equipment. This assertion has particular validity when considering small and medium-sized firms (SMEs) in Nigeria, since they may lack the financial capacity to effectively absorb these supplementary expenses. As a result, these enterprises would face the need of downsizing their activities or perhaps ceasing operations altogether, resulting in unemployment and a recession of the economy.
Furthermore, the escalation in tariffs might result in inflationary pressures since it raises the cost of imported products. Inflationary pressures have the potential to diminish the buying power of customers, resulting in a decline in demand for products and services. Business enterprises, namely those operating within the retail industry, may have difficulties in maintaining their viability amongst the prevailing circumstances characterised by a decrease in consumer expenditure.
The Unintended Consequences:
Although the primary objective of implementing higher tariffs is to stimulate domestic businesses, it is important to acknowledge that Nigeria’s manufacturing sector currently lacks the necessary strength to adequately satisfy the market’s demand for various products. The disparity between the availability of goods and services and the level of customer demand may result in scarcities, hence intensifying the economic difficulties experienced by both firms and consumers.
Moreover, the imposition of higher tariffs may also result in a rise in illicit activities like as smuggling and illegal commerce. As the cost of imported products increases, there is an increased motivation for people and corporations to circumvent established routes in order to evade tariff payments. This phenomenon not only results in a reduction of government income, but also poses a threat to the integrity and effectiveness of the legal system.
In summary, while the implementation of heightened tariffs may be driven by good intentions, their ramifications on the viability of businesses in Nigeria are intricate and mostly adverse. The implementation of these measures has the potential to result in elevated operating expenditures for enterprises, induce inflationary pressures, and generate a disparity between the levels of supply and demand. Hence, it is imperative for the Nigerian government to meticulously evaluate the possible ramifications of heightened tariffs and seek alternative strategies to bolster domestic sectors and guarantee their sustenance.
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The Impact of Increased Tariff on Business Survival in Nigeria