Organised private sector chides FG over N10/litre excise duty on non-alcoholic beverages

The Manufacturers Association of Nigeria (MAN) has said the introduction of excise duty of N10/liter on non-alcoholic, carbonated and sweetened beverages will have an overwhelming negative impact on the economy. Director-General of MAN, Segun Ajayi-Kadir said: “there is no doubt that the potential revenue gains are the basis for the introduction of this excise. It […]

The Manufacturers Association of Nigeria (MAN) has said the introduction of excise duty of N10/liter on non-alcoholic, carbonated and sweetened beverages will have an overwhelming negative impact on the economy.

Director-General of MAN, Segun Ajayi-Kadir said: “there is no doubt that the potential revenue gains are the basis for the introduction of this excise. 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.”

He said the food and beverage contributed the highest (38%) of the total manufacturing sector to the GDP. It comprises 22.5% of manufacturing jobs and generates more than  1.5million jobs. So, this excise would certainly cast a sunset on this performance.

Kadri explained that recent studies have shown that introducing excise on non-alcoholic beverages is likely to cause a 0.43% contraction in output and about 40% drop in total industry revenues in the next five years.

He said: “The government is estimated to generate an excise tax of N81bn between 2022-2025 from the group. This will not be sufficient to compensate the corresponding government’s revenue losses in other taxes from the group. For instance, the corresponding effect of reduced industry revenue on government revenues is estimated to be up to N142bn contraction in VAT raised by the sector and N54bn CIT reduction between 2022 to 2025.

The DG said as seen from previous impact analysis, excise affects production outputs, revenues and profits. This causes companies to pursue cost-cutting measures to reduce the effect of diminishing revenue and profits by reducing employee salaries or retrenchment.

Director-General, Lagos Chamber of Commerce and Industry (LCCI), Dr Chinyere Almona,  said that her immediate concerns were the likely increase in prices.

This, she said, would lead to decreased demand and consequently loss of jobs because of inherent reduction in production.

Almona said the prohibition on imported drinks should be better enforced to protect domestic production from unfair competition in the face of the high cost of production in Nigeria.

She recommended that the realised revenue from these levies be channeled to improve the country’s grossly inadequate health infrastructure.

“The chamber supports both the government’s revenue drive and the pro-health considerations of several stakeholders.

Chief Executive Officer, Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, also implored the government to put the move on hold to enhance job creation and poverty alleviation.

He noted that the manufacturing sector offered a good platform for the laudable aspiration of the president to create jobs and to lift people out of poverty.

He noted that excessive taxation could become unbearable for the private sector and hinder the job creation and poverty alleviation promised by President Muhammadu Buhari.

“It is worthy of note that manufacturers, including producers of non-alcoholic beverages, are already paying numerous taxes and levies which put a lot of pressure on them.

“Some of the taxes and levies that are already being paid include Corporate Income Tax of 30 per cent, Education Levy of 2 per cent and Value Added Tax (VAT) of 7.5 per cent.

“Others are Withholding Tax, Land Charges, Environmental Tax and numerous unofficial taxes.

“This move is ill-timed and inappropriate given the prevailing harsh economic and business conditions and a negation of the economic recovery and job creation aspirations of the Federal Government, he said.”