Health
In its usual habit of protecting Nigerians, the federal government has imposed excise duties on carbonated drinks in order to check a number of health conditions, including diabetes and obesity. But some Nigerians, including the manufacturers and the NLC have rejected the move and warned of the economic consequences of this anti-people legislation.
By Anthony Isibor
THE searchlight on ways of tackling the low revenue earnings of the federal government has unfortunately been directed at the carbonated drinks in the country and the consequence is the announcement of N10 per litre excise duty on carbonated drinks. To some Nigerians, this desperate move by the federal government did not come as a surprise as the plan had been in the offing for a long time now.
Reacting to this annual ritual, Dike Onwuamaeze, wrote that the Finance Act of 2019 increased the Value Added Tax by 50 per cent, from five per cent to 7.5 per cent, while in January 2021, the Finance Act of 2020 lowered the levies imposed on the importation of fully built vehicles by 35 per cent to the detriment of local automobile manufacturers. According to him, in January 2022, it is the turn of the manufacturers of non-alcoholic carbonated drinks as the Finance Act 2021 imposed an excise levy of N10 per litre on non-alcoholic carbonated drinks. The Finance Act, was signed into law by President Muhammadu Buhari on December 31, 2021 and it takes effect from January 2022.
It would be recalled that the first hint of such an increase was in 2019, when Zainab Ahmed, minister of finance, budget and national planning, announced that the government might introduce excise duty on carbonated drinks, and again in 2020, the comptroller-general of the Nigerian Customs Service, NCS, Hameed Ali, also proposed the introduction of excise duty on soft drinks.
Announcing the new sugar tax, Ahmed said that “There’s now an excise duty of N10 per litre imposed on all non-alcoholic and sweetened beverages.”
According to her, this is to discourage excessive consumption of sugar in beverages which contribute to a number of health conditions, including diabetes and obesity. Therefore, raising the excise duties is beneficial as revenues generated will be used for health-related issues and other critical expenditures.
“This is in line also with the 2022 budget priorities,” she said.
But the question most Nigerians are asking is “would this really solve the problem of diabetes as the government has said”.
However, a survey by Realnews shows that there are several other sources of sugar products in the market that are not covered in the government’s sugar tax.
Similarly, Nigerians do not believe that the revenue generated from the new sugar tax will be put into financing health-related and other critical expenditures in line with the 2022 budget priorities as the minister claimed.
This is also because the ordinary man is yet to feel the impact of the revenues generated from the removal of subsidies on petroleum products, including petrol in the past.
It is pertinent also to note that with this introduction, the price of 50cl soft drink which currently stands at N150 will jump to about N200.
However, since the announcement of this new sugar tax, several, stakeholders and Nigerians have come out to fault the federal government’s action, describing the plan as counter-productive to development.
Reacting to the new sugar tax, Segun Ajayi-Kadir, Director-General, Manufacturers Association of Nigeria, MAN, noted that the introduction will likely cause a 0.43 per cent contraction in output and about 40 per cent drop in total industry revenues in the next five years, describing the move as “rather unfortunate”.
He said that although Nigeria is the sixth-highest consumer of soft drinks, the per capita consumption is low.
“Introducing excise duty will easily reduce production capacity, causing manufacturers to struggle to meet investor commitments as well as cause investors to take investments to other countries,’’ he said.
He also added that there would be a drop in production levels or ability to purchase raw materials as a result of the introduction of the excise tax and it will result in reduced profits for the supply chain players in the non-alcoholic beverage sector.
“One is particularly worried about the ripple effect of the introduction of the excise duty, despite strenuous evidence-based advice to the contrary. This will have an unpleasant impact on employment, households and consumers,” he said.
He added also that the introduction of an additional tax will cause manufacturers to raise prices of their products to higher rates, thus shifting tax incident to consumers all in a bid to pay off the extra tax and maintain profit.
Some of the arguments of the manufacturers point to the fact that “non-alcoholic beverages serve as a quick source of carbohydrate and nutrients in the absence of actual food for the average low-income earner.
“That the introduction of excise duty could lead to an increase in price, putting this food alternative out of the reach of the poor segments.
“It would appear that the goose that lays the golden eggs is being led to perdition, seeing that the affected sub-sector has contributed most significantly to the economy and taxes, despite the debilitating impact of naira devaluation, the inadequacy of forex and the COVID-19 pandemic.
“The food and beverage sector contributed the highest (38 per cent) of the total manufacturing sector to the Gross Domestic Product (GDP). It comprises 22.5 per cent of manufacturing jobs and generates more than 1.5 million jobs. So, this excise duty would certainly cast a sunset to this performance,” the manufacturers argued.
On its own part, Jimoh Oyibo, President of food, Beverage and Tobacco Senior Staff Association, FOTOB, explained that the 30 per cent excise levy on alcoholic drinks is not enough justification to subject companies that are struggling to survive to another financial burden. If this country needs to survive, “Food, Beverage and Tobacco Sector must be taken care of”.
“The federal government must engage all stakeholders constructively to arrive at a more beneficial conclusion to save the already struggling companies in the sector that are only surviving on a small profit margin,” he said.
Similarly, Muda Yusuf, Chief Executive of the CPPE described government’s decision as ill-timed and insensitive. “Nigerian manufacturing companies and indeed most investors, are going through tremendous stress at the moment. They are currently grappling with serious macro-economic challenges and structural constraints impacting on capacity utilization, productivity and competitiveness.
“This is affecting sales, turnover, profitability, shareholder value and the sustainability of investments. The norm globally at this time is to provide incentives for industries to aid their recovery from the shocks of the pandemic and escalating costs. We cannot afford to be doing the exact opposite,” he said.
The Nigeria Labour Congress, NLC, has also rejected the imposition of taxes on non-alcoholic and carbonated drinks. A statement signed by the NLC President, Ayuba Wabba, in Abuja stated that implementing increased taxes on non-alcoholic and carbonated drinks, which is one of the provisions in the 2021 Finance Act, would impose more hardship on the citizens. It, therefore, asked the National Assembly to urgently amend the sections of the Finance Act, which re-introduced excise duties on non-alcoholic and carbonated drinks.
It recalled a letter dated 27th November 2021, the Nigeria Labour Congress wrote to the President and Commander-in-Chief of the Armed Forces of Nigeria, President Muhammadu Buhari, GCFR and the leadership of the two chambers of the National Assembly pleading that government should suspend the implementation of the excise duties on non-alcoholic, carbonated and sugary drinks.
According to the statement, Congress provided a number of very cogent reasons why government should not go ahead with the decision to impose fresh taxes on soft drinks. “One of the reasons we advanced was that the re-introduction of excise duties on non-alcoholic, carbonated and sugary drinks will impose immense hardship on ordinary Nigerians who easily keep hunger at bay with a bottle of soft drink and maybe a loaf of bread.
“Our concern is the mass hunger that would result from the slightest increase in the retail price of soft drinks owing to imposition of excise duties as it would be priced beyond the reach of many Nigerians. Congress was also alerted by the complaint of manufacturers of soft drinks in Nigeria that the re-introduction of excise duties would lead to very sharp decline in sales, forced reduction in production capacity, and a certain roll back in investments with the certainty of job losses and possibly shut down of manufacturing plants.
“Nigerians would recall that this was also the complaint of tyre manufacturing companies such as Dunlop and Michelin which was overlooked by government until the two companies relocated to neighbouring Ghana. A similar situation is playing out with the soft drinks manufacturing sub-sector. Government should pay attention.”
It noted that with 38% of the entire manufacturing output in Nigeria and 22.5% share representation of the entire manufacturing sector in Nigeria, the food and beverage industry is the largest industrial sub sector in our country. The food and beverage sub-sector has generated to the coffers of government N202 billion as VAT in the past five years, N7.3 billion as Corporate Social Responsibility and has created 1.5 million decent jobs both directly and indirectly.
“There is thus no gainsaying the fact that the industry is a golden goose that must be kept alive. The health reason proffered by government as reason for the reintroduction of the excise duties seems altruistic. Yet, we are amiss why the government did not place the excise duties on sugar itself as a commodity rather than on carbonated drinks.
“The truth of the matter is that an additional increase in the retail price of carbonated drinks would put more Nigerians at risk of serious health challenges as many people would resort to consuming sub-standard and unhygienic drinks as substitutes for carbonated drinks.
“The appeal to rescind the re-introduction of excise duties on non-alcoholic drinks becomes even more compelling when the projected immediate revenue expected from the policy is weighed against the potential long-term loss to both manufacturers and government. The beverage sub-sector will lose 40% of its current sales revenue.
“This translates to a loss of N1.9 trillion. While the government will only make total projected receipts of N81 billion from the proposed reintroduction of the excise duties. Government also stands to will lose N197 billion in VAT, Company Income Tax and Tertiary Education Tax as a consequence of the expected downturn in overall industry performance should the excise duties be effected as being planned.
“In light of the foregoing, we ask the National Assembly to quickly amend the sections of the Finance Act that re-introduced excise duties on non-alcoholic and carbonated drinks. We also ask the government to extend COVID-19 palliatives and support incentives to the Food and Beverages industry to cushion the shock and haemorrhage that the industry is trying to recover from.
“Finally, we demand that Government should engage Employers in the subsector and Organized Labour in sincere discussions on other options that can deliver a mutually satisfying win-win solution to this issue. We hope that the current situation will not be allowed to degenerate into a breakdown in industrial relations in the sector and generally in the country,” the statement added.
– Jan. 17, 2022 @ 10:09 GMT |
A.I
Tags: Jimoh Oyibo Muda Yusuf President Muhammadu Buhari Segun Ajayi-Kadir
