MAN to FG: Increasing Excise Tax on SSBs Will Negatively Impact Businesses, Consumers

Dike Onwuamaeze

The Manufacturers Association of Nigeria (MAN) has warned the federal government that further increase in excise tax on carbonated non-alcoholic beverages from the current N10 per liter to N30 per liter to checkmate sugar related ailments would have dire consequences like massive layoffs of workers, factory shutdowns, and an exacerbation of the already rampant unemployment crisis in Nigeria.

The manufacturers’ association expressed this view in a statement titled “Why Views about Sugar Impact on People’s Wellbeing Are Misleading,” which was exclusively obtained by THISDAY. There have been calls in recent weeks by some organisations on the federal government to increase the excise tax on sugar-sweetened beverages (SSBs) under the guise of combating diabetes and obesity.

The Director General of MAN, Mr. Segun Ajayi-Kadir, stated emphatically that “increasing taxes on SSBs will have severe repercussions on businesses, consumers, and the government’s revenue.

“Nigeria’s previous implementation of a sugar tax in 2021 already had significant repercussions, as the industry faced an eight per cent to 10 per cent revenue decline, and the Food and Beverage sub-sector experienced negative GDP growth.

“These distressing indicators foreshadow a bleak future if the proposed tax is enforced, with dire consequences including mass layoffs, factory shutdowns, and an exacerbation of the already rampant unemployment crisis, predicted to hit 41 per cent in 2023.”

Ajayi-Kadir further argued that “the collateral damage of this tax would not be limited to the manufacturing sector alone. The burden will disproportionately fall on lower-income consumers who rely on SSBs as a staple in their diet due to limited access to fresh produce amidst soaring inflation rates.

“The propo sed tax and the inflation crisis will further erodetheir purchasing power, leading to higher prices for essential goods and services. The vicious cycle of deprivation and scarcity will only worsen, pushing Nigeria deeper into food shortage nightmares.

“As seen in Denmark’s case, the increase in the tax on SSBs can lead to inflation, which will affect the purchasing power of consumers and result in higher prices for other goods and services. This is counter-productive because the country is currently facing one of its worst inflation crises, and a further increase in everyday commodities would only cause more.”

He also urged the government to consider the potential decline in tax revenue that would result from increased taxes since “higher prices may lead to reduced consumption, which in turn could lead to a decrease in sales volume. As a result, the projected revenue increase from the tax hike may not materialise, adversely affecting the government’s ability to fund essential public services and initiatives.

“Rather than resorting to punitive taxation, a more holistic approach should be adopted to address public health concerns. Educating the public about balanced diets, promoting physical activity, and encouraging healthier lifestyle choices should be at the forefront of any strategy.

Collaborative efforts between government agencies, NGOs, and the private sector

can contribute to creating awareness and driving positive behavioural changes.”

According to him, these taxes often fail to deliver their

intended results, and Nigeria should instead focus on proven strategies like

behavioral approaches that yield better outcomes for the population.

“A behavioural approach that rewards healthier choices through

improved healthcare and agricultural subsidies is a more effective and

sustainable solution. By incentivising farmers to adopt organic farming

practices, investing in research for sustainable agriculture, and supporting

local farmers’ markets, the government can make nutritious food more accessible

and affordable for all while supporting small-scale farmers.

While it is important to address public health challenges, a

knee-jerk reaction to increasing taxes on sugar-sweetened beverages is not an

effective or equitable solution. Nigeria’s sugar consumption should be examined

comprehensively, taking into account overall dietary patterns.

“Unsubstantiated claims and punitive taxation can have

far-reaching negative consequences for businesses, consumers, and the national

economy.

“Rather than focusing solely on taxation, we should advocate for

a multi-faceted approach that includes education, lifestyle changes, and

agricultural interventions. By working together, we can achieve a healthier

nation while also safeguarding economic growth, consumer choice, and the

national reputation of Nigeria.”

It should be recalled that some non-governmental

organisations, National Action on Sugar Reduction (NASR) and Corporate

Accountability and Public Participation Africa (CAPPA), have urged the federal

government to increase the taxation on sugar beverages from N10 to N30 per

liter.

A representative of the coalition, Mr. Edozie Chukwuma, said:

“We are basically asking the government, Ministries of Finance and Health to

protect the lives of Nigerians. Sugary drinks are very cheap and accessible,

but the health implications of consuming these drinks are very deep.”

Similarly, the Executive Director of CAPPA, Mr. Akinbode

Oluwafemi, said that the introduction of N10 per litre excise duty imposed on

sugar-sweetened beverages (SSB) was an effective measure and advocated for its

increase to enhance public health outcomes.