Addressing The Hazards in Tobacco Market

Ugo Aliogo examines a recent research finding published by Centre for the Study of the Economies of Africa, which states that 29,472 deaths in Nigeria are attributable to smoking

The tobacco epidemic is one of the biggest public health threats the world has ever faced; killing more than eight million people a year globally. More than seven million of those deaths are the result of direct tobacco use while around 1.2 million are the result of non-smokers being exposed to second-hand smoke, according to the World Health Organisation (WHO).

Another survey revealed that over 1.3 billion people in the world use tobacco and over 80 per cent of this population live in low-and-middle-income countries where the burden of tobacco-related illness and death is very heavy. Nigeria is the most populous country in Africa and has one of the leading tobacco markets.

Undoubtedly, the above statistics are worrisome and calls for serious actions to be taken by authorities concerned to stem the tide of tobacco smoking. Meanwhile, on the home front, Nigeria is not exempted from the staggering death statistics. It was discovered that 16, 100 Nigerians are killed annually by tobacco. While over 18 billion cigarettes are being sold and consumed annually, which makes it worrisome despite laws put in place to curb production and importation of the ‘killer sticks’ as tobacco, companies have devised new ways to advertise on social media, Nollywood movies, sponsoring events, and others.

WHO FCTC Protocol

Following the 2003 World Health Organization (WHO) Framework Convention on Tobacco Control (FCTC), Nigeria ratified the convention agreement in 2005, and in 2015 signed into law the National Tobacco Control (NTC) Act that regulates all aspects of tobacco control including advertising, packaging, and smoke-free areas. Despite these initiatives, some reports suggest that the prevalence of smoking in the country is still on the rise especially with 16,100. However, Article 14 of the WHO Framework Convention on Tobacco Control (FCTC) promotes tobacco cessation awareness and support for tobacco dependence. While Nigeria has put in place mechanisms for implementation of some of the FCTC measures, unfortunately, the measure of adopting cessation programmes designed to offer help for smokers to quit remains largely underutilized.

According to the FCTC, “Main countries of origin for illicit cigarettes are China, Paraguay, the Russian Federation, the United Arabic Emirates, Ukraine, Belarus, Moldova, Kenya, and Zimbabwe. While main destinations are: The European Union, the United States of America, Brazil, Canada, South Africa, Iran, Iraq, Hong Kong, and Pakistan. While the main transit and transit-destination countries are: Egypt, Tunisia, Algeria, Libya, Mali, Niger, Guinea, Nigeria, Syria, Malaysia, India, Cambodia, Indonesia, Vietnam, Argentina, Chile, Peru, Bolivia, Colombia, Venezuela, Poland, Lithuania, Greece, Montenegro, Turkey, and Bulgaria. In addition, free trade zones have also been used in the illicit tobacco trade in the UAE, Singapore, the Philippines, Malaysia, Panama, Greece, and Egypt.”

The FCTC noted that 54 parties have signed the Protocol. Among them are major players in the global illicit tobacco products trade, such as China, the EU, France, Germany, the United Kingdom, Spain, South Africa, Kenya, Iran, Panama, and Colombia.

The WHO Protocol is confident that if most of the source, transit, and destination countries ratify the Protocol, the illicit cigarette market is expected to be reduced significantly.

To broaden the scope of the discourse, THISDAY spoke to the Executive Director, Civil Society Legislative Advocacy Centre (CISLAC) Auwal Musa Rafsanjani, whose viewpoints on the issue was that illegal tobacco market in Nigeria is huge, adding that clamping down on illegal activities of players in the industry falls within the purview of the Federal Ministry of Health (FMoH), Federal Ministry of Finance and the Nigerian Customs Service (NCS).

He also affirmed that in line with the National Tobacco Control Act 2015, the health ministry has the power to issue licenses for the manufacture and distribution of tobacco and tobacco-related products.
He maintained that the ministry of finance makes fiscal policies on taxation, while the custom service duties are to collect these taxes and also to ensure that illegal tobacco products do not find their way into the country, adding that these Ministries must work together to ensure that illicit tobacco doesn’t gain entry into the Nigerian market.

He hinted that there are still huge gaps in addressing the problem by these government bodies although some milestones have been achieved by them.

On his path, the Senior Global Director, Anti-Illegal Trade, Japan Tobacco International (JTI) Ian Monteith, said criminals have and continued to take advantage of COVID with continental differences.
He also stated that they recognize that unemployment increased and purchasing power disposable income has reduced as a result of the impact of the COVID-19 pandemic.

Monteith further explained that a JTI report noted that across the 30 European countries (EU, UK, Norway, and Switzerland) 34.2 billion cigarettes smoked in 2020 were illegal, which represents 7.8 percent of total cigarette consumption in the EU and the tax loss for governments c.€8.5 billion.
He remarked that from a KPMG survey, France is the European country with the highest illicit cigarette trade incidence – 32 per cent at the end of 2020, adding that South Africa showed Prohibition did not work, “more amazingly has been the growth of illegal manufacturing in the European Union (EU).”

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Drivers of Illicit Tobacco Trade

Rafsanjani is optimistic that the low or non-payment of required taxes is driving illicit trade in the country, thereby fuelling the trade in illicit tobacco, and it is heightened by the lack of a robust system of tracking and tracing these products as has been witnessed in such African countries like Kenya.

According to him, “There have been alleged reports that the Tobacco Industry is behind the illegal trade in tobacco to avoid taxation. Tobacco products like cigarettes are not products manufactured without better automation within the highly technical industrial arena. It is the Tobacco Industry that has such facilities to manufacture these products. While they push their legal brands through the ‘right’ channels, they push the illicit wants through the back door.”

Monteith argued that organized criminals are highly adaptable, creative, exploiting public anxiety and enriching themselves not just from tobacco, but other products such as PPE, alcohol, and pharmaceutical even counterfeit COVID vaccines have been identified in Asia.

The JTI’s Senior Global Director asserted that some consumers believe illegal tobacco is a victimless crime, therefore there is a need to inform them of the broader social impact of buying illicit products from criminal groups, “many of these groups also traffic people and weapons, with far-reaching consequences for society.”
He maintained that illegal trade impacts everyone, farmers, millions of retailers, suppliers to consumers, pointing that the loss of revenue to law-abiding people is significant, as is the impact on consumers lured into buying sub-standard products.

According to him, “HMRC estimates that 8 per cent of cigarettes and 33 per cent of roll your own tobacco smoked in the UK is illicit – HMRC Measuring Tax Gaps Report 2020; In 2020 UK Tobacco revenue increased by £1.35 billion due to closed borders demonstrating the extent of the illegal trade. 14MM victims costing an estimated $150 billion to society and governments. New trend of debt bondage. Motivate the public to accept responsibility, collective actions however small, can have an impact.”

COVID-19 Pandemic, Illicit Tobacco Trade

The CISLAC Executive Director argued that there is no evidence to suggest that the COVID-19 impacted illicit trade in cigarettes, stating that statistics reveal that smokers used more of the products within the pandemic and supplies were not reduced enabling price stability of the product.

Monteith said: “So, COVID has not prevented criminals from profiting. It rather puts pressure on consumers’ purchasing power and pushes them to turn to illegal products. That’s why we need a more coordinated approach and a combination of partnerships fighting the underlying causes as well consequences and symptoms. Without demand, there is no supply. One important action is to educate consumers that with every illegal pack they buy they support criminal groups. Global community campaigns are required.”

Border Control

There is the argument from the FCTC that transnational organised crime markets are global in scale; therefore strategies to address them should also be global. The principles of combating transnational organised crime also apply to the illicit tobacco trade: the global scope and multifaceted nature of the illicit tobacco trade require a coordinated international response. The protocol to eliminate illicit trade in tobacco products is the global response of the global tobacco control community. The expectation is that if most countries that are parties to the WHO FCTC will ratify the Protocol, it is hoped that it will be highly effective and reduce cigarette smuggling by more than 60 per xent.

The FCTC remarked that countries differ in their relationship to the illicit tobacco trade: some countries are the source for illicit tobacco products, while others play a role in the transit of the illicit products, while some are the destination.

However, Rafsanjani’s perspective is that the country’s porous borders and the absence of a robust tracking and tracing system contribute to the illicit trade in tobacco, moreover, poor fiscal policy on novel products such as shisha and hookah are fueling the increased sales of these illegal products in Nigeria.

The JTI Senior Global Director avowed that the company has been advocating for increased cooperation among countries’ intelligent agencies to stop illicit trade across borders, cooperation with enhanced intelligence sharing between law enforcement agencies (LEAs) needs to be supported by the private sectors.

According to Monteith, “In its operations in Nigeria JTI has made anti-illicit trade one of her major objectives, scaling up awareness and always ready to partner with relevant agencies of the government such as the Nigeria Customs Service (NCS) in the collective fight against illicit products, contrabands, and smuggling activities. JTI is also partnering with Interpol to combat the illicit tobacco trade.

“Governments should take a holistic approach when tackling illegal trade. Excessive regulation and sudden and sharp tax increases incentivize illicit trade. Law enforcement is effective only if reasonable and balanced policies are in place. As governments seek to revitalize the economy, they should consider the possible pitfall of sharp tax hikes or additional taxation designed to change behaviours around lifestyle choices and the environment that drive down affordability.”

The Solution

The need to tackle illicit trade has become very much imperative because it stifles the operation of the legitimate industry, erodes market share, and has wide-reaching negative societal impacts. Furthermore, the trade allows criminal gangs to smuggle across borders, engaging in large-scale tax evasion and producing counterfeit cigarettes. Judging by the weak penalties for perpetrators, poor border controls, low arrest rates, and tobacco taxes, there is a huge disparity between neighbouring countries.

In combating the illicit tobacco trade, the FCTC suggests that parties should not rely on tobacco industry estimates for measuring the illicit market in their country, adding that those estimates are often unreliable and alarmist. It also argued that parties should be encouraged to collect data on the illicit trade and undertake an analysis of the characteristics of confiscated tobacco products such as the product type, brand name, place of seizure, modus operandi, intended destination, counterfeit or not, quantity and weight.

The CISLAC Executive Director expressed great optimism that there is a way of the problem, stating that in order to prevent this illegal trade, the Protocol to Eliminate Illicit Trade in Tobacco Products (PEITT) aims to make the supply chain of tobacco products secured through a series of measures by governments.

According to him, “There is need for the establishment of a global tracking and tracing regime within five years of entry into force of the protocol, comprising national and regional tracking and tracing systems and a global information-sharing point located in the Secretariat of the WHO FCTC. Other provisions to ensure control of the supply chain include licensing, record-keeping requirements, and regulation of Internet sales, duty-free sales, and international transit. To address illicit trade that has occurred, the Protocol establishes offenses, addresses liability and seizure payments as well as the disposal of confiscated products.”

Monteith is confident that vigorous enforcement and robust deterrents are essential to combat illegal trade.

He explained further that effective collaboration between relevant government agencies and Law Enforcement Agencies (LEAs) is needed at both an international and national level, “along with a desire to increase the fines and punishments for those caught producing, distributing, and selling illegal tobacco products.”

According to him, “Better cooperation means stepping up enforcement at borders, improving intelligence sharing between the tobacco industry and LEAs; simultaneously, governments must explore fiscal measures that allow consumer confidence to grow and avoid the temptation to spend on illicit products. UK 2020 The Treasury received a £1.35 billion windfall from legal tobacco sales.

“Strong enforcement with reasonable and moderate taxation are thee essential preventative ingredients. Governments are aware extreme tax rises do not work; therefore it requires a combination of Public/Private partnerships cooperation and collaboration.”