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Nigerians to pay more on non-alcoholic, carbonated beverages

Nigerians to pay more on non-alcoholic, carbonated beverages

Beginning this year, Nigerians will be expected to pay tax on consumption of non-alcoholic, carbonated, and sweetened beverages as contained in the new 2021 Finance Bill currently before the National Assembly.

This is part of the government’s policies to ramp up low revenues, which authorities say pose major fiscal constraints along with ballooning debt.

Zainab Ahmed, minister of finance, budget, and national planning, disclosed this during the public presentation and breakdown of the highlights of the 2022 budget in Abuja on Wednesday. The government has concluded plans to end fuel subsidies by July 2022, paving the way for the full implementation of the Petroleum Industry Act (PIA), the minister disclosed.

“We have only provided subsidy for petrol from January to June,” she responded to a question at the event, “And that means that from July, there is no provision that we made for fuel subsidy.

“Our assumption is that by June, we would have been able to work through a process together with all stakeholders including the National Oil Company, all the regulators in the oil and gas sector, different MDAs that have a role to play as well as businesses and labour organisations.”

Moreover, by removing subsidies government is only complying with the PIA, which specifies that all petroleum products should be deregulated.

To mitigate the impact of fuel subsidy on the economy, government is planning to provide N5,000 transport subsidy for between 20 and 40 million, identified, targeted Nigerians – though the numbers are still being discussed and to be agreed upon.

She, however, said there were also other proposals in this regard, including identifying through the transparent workers union, commercial vehicle drivers, get them registered and pass the subsidies through them using vouchers.

On the new taxes, the minister said some N10/litre Excise Duty would be imposed on all non-alcoholic, carbonated, and sweetened beverages, which is in line with the new ‘sugar tax’ introduced by the government to raise revenues for health-related and other critical expenditure.

According to Ahmed, the tax seeks to discourage excessive consumption of sugar in beverages, which contributes to debilitating diseases like diabetes, obesity, etc.

“This policy is not just to ramp up revenues but also to drive health benefits,” the finance minister stated.

She also disclosed plans to introduce tax on e-commerce businesses by non-resident companies.

This, according to her, the proposed law would empower the Federal Inland Revenue Service (FIRS) to access non-resident firms to tax on fair and reasonable turnover tax basis on turnover earned from providing digital services to Nigerians.

“Such digital services include Apps, high-frequency trading, electronic data storage as well as online advertising,” she said.

While the government seeks ways to raise revenues to enable it to implement the record N17.13 trillion 2022 budget, it also projects to spend N3.60 trillion on debt service – higher than the N3.36 trillion projected oil revenues for the year.

The amount also represents 21 percent of total expenditure and 34 percent of total anticipated revenues.

Read also: World Bank predicts Nigeria’s inflation rate may be among world’s highest in 2022

Key assumptions of the N17.13 trillion 2022 budget, signed into law by Buhari on December 31, 2021, include oil production at 1.88mbpd, oil price at $62/b, the exchange rate at N410/$. Inflation is projected to stay within the double-digit of 13 percent.

The expectation is that consumption would increase to N149.35 trillion as well as nominal GDP to N184.38 trillion, with a 4.20 percent GDP growth, she said.

The 2022 aggregate government expenditure, projected at N17.13 trillion is 18 percent higher than 2021 budget, with recurrent spending estimated to reach N6.91 trillion; capital expenditure, N5.96 trillion, and N3.61 trillion projected for debt servicing.

N270.71 billion, representing 1.6 percent of total expenditure, was provided to retire maturing bonds to local contractors/suppliers, and according to the minister, this is in line with the government’s commitment to offset accumulated arrears of contractual obligations dating over a decade.

But aggregate revenue is projected at N10.74 trillion, which is 32 percent higher than N8.12 trillion projected in 2021 budget. 35 percent of projected revenues are to come from oil related sources while 65 percent would come from non-oil sources.

Details of the budget show a deficit of N6.39 trillion, representing 3.46 percent of GDP.

The deficit is to be financed mainly by borrowings from both domestic sources- N2.57 trillion; foreign – N2.57 trillion and multilateral/bi-lateral loan drawdowns of N1.16 trillion as well as N90.7billion privatisation proceeds.

Nigeria’s debt had ballooned to over N38 trillion by the end of September 2021 amid tight revenues, which had seen government spend most of its incomes on debt service.

For instance, the Federal Government generated N3.93 trillion within the first eight months of last year but used N2.89 trillion to service debt same period.

The debt level is sustainable and that borrowings have helped resuscitate the ailing economy from two recessions in five years, the minister insisted.

But debt service to revenue ratio at 76 percent is the highest among peer African economies, “indicating that what we have is not a classic debt sustainability problem, but a revenue challenge,” she however noted.

Speaking on the 2021 budget implementation, she disclosed that a total of N12.56 trillion had been spent out of the N13.57 trillion budget.

Of the expenditure, N4.20 trillion was used to service debt and N3.02 trillion for personnel cost, including pensions.

As of November 2021, N3.40 trillion had been expended for capital projects.

On the revenue side, Federal Government’s aggregate revenue was N5.51 trillion. Other revenues amounted to N2.80 trillion of which FGN independent revenues was N1.10 billion while government-owned enterprises retained revenue was N1.20 trillion, she said.

The minister however explained that while revenue currently remained the major challenge of the government, efforts were ongoing to ensure effective implementation of the strategic revenue growth initiatives to improve revenue collection, expenditure management, and fiscal sustainability. Such efforts, she said, helped the government’s independent revenues to surpass the N1 trillion mark in November 2021, as against the N973.4 billion target.

“The 2022 budget is expected to further accelerate the recovery of our economy and facilitate the completion of critical projects as well as improve the general living condition of our people.

“Achieving government’s budget objectives requires bold, decisive, and urgent action and government is determined to act as may be required,” she said.