BusinessDay

The new excise duty on non-alcoholic beverages

We reject the newly introduced N10 per litre excise duty on all non-alcoholic, carbonated, and sweetened beverages. We, therefore, call on the federal government to drop the idea by amending the Finance Act 2022 which provides for the imposition of the tax on manufacturers.

Although the imposed excise duty will possibly have a positive impact on the country’s revenue, it will however further hurt the poor who buy cheaper products, stifle the manufacturing business, increase production cost, market price as well as lead to job losses.

Thus, rather than tax the consumers, government should tax sugar producers and those in the allied business. Instructively, the Manufacturers Association of Nigeria (MAN), Nigeria Employers Consultative Association (NECA) and the Nigeria Labour Congress (NLC) have all kicked against the new tax regime.

In separate statements, they highlighted the negative impacts the excise duty would have on the manufacturing industry if implemented which include job losses and industrial action by the workers. Commonly known as ‘Sugar Tax’, the new tax is contained in the Finance Act signed into law by President Muhammadu Buhari on December 31, 2021.

When did the Federal Government begin to take the issue of health challenges in the country serious?

Justifying the tax, Minister of Finance, Budget and National Planning, Zainab Ahmed had during the 2022 budget breakdown explained that the excise duty on soft drinks would discourage excessive consumption of sugary beverages which she alleged contributes to diabetes, obesity among others. But this claim falls flat on the basis of available health statistics which shows that Nigeria has fewer cases of diabetes and obesity compared to other countries. Moreover, when did the Federal Government begin to take the issue of health challenges in the country serious?

Read also: How FG’s tax on carbonated drinks will affect manufacturers, consumers & economy

Surprisingly, while stating that the reason for the increased excise duty on soft drinks and beverages was on health grounds, the finance minister ignored the fact that the current administration has for long, not given priority attention to the health care sector. In the light of the above, therefore, it will be interesting to know if the federal government wants to use the new excise duty to stop the consumption of carbonated drinks with a view to reducing its health impacts on the citizens or if the government simply wants to generate more revenues.

It is to be noted here that the Federal Government has for the umpteenth time failed to meet the Abuja Declaration by African leaders in 2001 and the World Health Organisation (WHO) to allocate, at least, 15 per cent of yearly national budgets to health. In April 2001, the African Union (AU) countries met in Abuja and set a target of at least, 15 per cent of the annual national budget for the health sector.

A breakdown of the 2021 appropriation bill presented to a joint session of the National Assembly by President Muhammadu Buhari showed that only 4.526 per cent (about N592.166 billion of the proposed N13.082 trillion) was allocated to health despite the on-going COVID-19 challenges and the threat of other epidemics.

By contrast, following the devastating effects of COVID-19, governments all over the world have continued to provide incentives for industries to speed up recovery from the shocks of the pandemic which include; inflation, terrorism, climate change and other issues. But it appears that the Nigerian government thinks in other directions.

As a developing economy, Nigeria cannot afford to be doing the exact opposite. This is because manufacturers, across all product segments need a respite, especially in the light of the unprecedented increase in production and operating costs. Unarguably, manufacturers in Nigeria have been contending with the dislocations caused by the pandemic and the recession that followed.

They are also facing serious crises resulting from liquidity challenges in the foreign exchange market, which is impacting adversely on the cost of production, sales, turnover, profitability and shareholder value.

Furthermore, they are confronted with intense pressures arising from numerous structural bottlenecks that are creating sustainability challenges for investors, especially those in the SME segment. Also, there are concerns with the significant spike in the cost of raw materials, investment capital, high import duty, energy, transportation and logistics and shipping.

The unresolved Apapa road gridlock and similar incidents in various parts of the country are clear examples of some of the burdens faced by manufacturers in the country.

Thus, rather than further compound the heavy burden on the manufacturers especially those in the SME sector, government should continue to support and promote the industry to attain full recovery after the onslaught of the pandemic and position it to accommodate the teeming unemployed Nigerians estimated to constitute about 33% of the entire Nigerian population.

Thus and if we may be allowed to reiterate, the new tax is in reality a misplacement of priorities. Other concrete steps must be taken to ensure that a speedy recovery is made to bear on our ailing economy. This is with a view to ensuring a more abundant life for our teeming and suffering populace.

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