NIGERIA – The Federal Government of Nigeria has announced the introduction of excise duty of N10 (US$0.024) per litre on all non-alcoholic, carbonated and sweetened beverages in the country.
The charge is part of a new policy introduced in the Finance Act which was signed into law by President Muhammadu Buhari on December 31, 2021, alongside the 2022 Appropriation Bill.
According to the Minister of Finance, Budget and National Planning, Zainab Ahmed, the new sugar tax was introduced to discourage excessive consumption of sugar in beverages, which contributed to diabetes, obesity and other diseases.
“There’s now an excise duty of N10 per litre imposed on all non-alcoholic and sweetened beverages. And this is to discourage excessive consumption of sugar in beverages which contributes to a number of health conditions including diabetes and obesity.
“But it is also used to raise excise duties and revenues for health-related and other critical expenditures. This is in line also with the 2022 budget priorities.”
With the introduction of the N10/litre excise duty on carbonated drinks, the pallet of Nigerians used to fizzy drinks will go sour, whilst manufacturers will be forced to increase the retail price, thus, dipping a hole in the already tight pockets of the groaning consumers.
The new policy might seem as a shock to may, but according to This Day, Minister of Finance had prepared the minds of Nigerians in 2019 for a possible introduction of excise duty on carbonated drinks.
Similarly, Comptroller-general of the Nigeria Customs Service (NCS), Hameed Ali, in 2020 also hinted at the collection of excise duty on imported soft drinks.
Meanwhile a coalition of non-governmental organizations called National Action on Sugar Reduction (NASR), has been advocating for the move, stating it is needed if the Nigerian government is to tackle diabetes and obesity.
Manufacturers Association of Nigeria against the sugar tax
However, according to a report by Punch, the Manufacturers Association of Nigeria (MAN) has warned that a new tax imposed on carbonated drinks would be counter-productive.
In a report, titled ‘key considerations against excise on non-alcoholic beverages’, MAN projected that the government might collect N81bn revenue from excise duty on carbonated drinks between 2022 and 2025, but lose N197bn within the same period from other taxes, such as Value Added Tax and Company Income Tax from the manufacturers of soft drinks.
The report added that introducing excise duty would cause the beverage sub-sector of the food and beverage industry to lose up to N1.9tn in sales revenue between 2022 -2025, due to the imposition of the new taxes with simultaneous adverse effects on jobs and supply chain businesses.
With the move, Nigeria joins South Africa who introduced the Health Promotion Levy (HPL) “the sugar tax” in 2018.
A study by South African Medical Research Council Centre for Health Economics and Decision Science, PRICELESS-SA and partners, indicated that following implementation of the tax, there was a 51% reduction in sugar, a 52% reduction in calories, and a 29% reduction in volume of beverages purchased per person per day in comparison to pre-tax period.
On the flip side, the National Economic Development and Labour Council (NEDLAC), revealed that government surpassed the budgeted revenue collected from the HPL in 2018/2019.
However, the following year the remittances declined by 23% in 2019/20 and 20% in 2020/21, due to a significant degree of reformulation in the beverage industry.