The carbonated soft drinks sub-sector of the Manufacturers Association of Nigeria (MAN) has raised a discomforting alarm over the Federal Government’s proposed 20 percent ad-valorem excise tax on non-Alcoholic beverages which covers the widely consumed Carbonated Soft Drinks (CSD) segment.
Rising from a meeting last Thursday in Lagos, the heads of the sectoral group argued that such a move would spell doom for the sector as the prevailing N10 per litre tax regime is already crippling the sector with its biting effects on their businesses.
Industry study indicates that the impacts of the prevailing N10 per litre excise tax between June and August 2022 shows a minus eight percent revenue decline as a direct result of excise tax implementation. It is projected that the decline will hit minus 25 percent by December, if not reviewed. This excludes the cost of write-offs of products excised but not sold. With the proposed 20 percent ad-valorem tax, the collapse of the soft drink market is imminent, according to the group.
It further said: “This will be catastrophic as thousands of jobs will be affected and the ultimate aim of the government in collecting revenue will be completely defeated.
‘’Most certainly the additional 20 per cent will not only kill the sector but result in the loss of revenue by the Federal Government, and a consequential phenomenal loss of jobs by various layers of the Nigerian workforce.’’
MAN’s soft drinks manufacturers sub-sector accounts for 33 percent of the manufacturing sector in Nigeria.
The manufacturing industry contributes 15 percent to Nigeria’s Gross Domestic Product, while the food and beverage sector contributes five percent with a payment of N202 billion to the government on Value Added Tax and N207 billion in Company Income Tax, an huge amount that would be lost by the Federal Government if the sector is allowed to collapse. And this will have a multiplier effect on infrastructural development and growth of the already troubled economy.
According to the Nigeria Bureau of Statistics, in the last five years, the food and beverage division of the economy generated 1.5 million jobs — direct and indirect. From 2020 to date, some companies in the sector strived to pay minimum tax, which is a pointer to the fact that the business climate is deteriorating, as the companies finding it difficult to carry out their operations effectively.
There is evidence that the current N10 per litre excise tax on non-alcoholic beverages is ravaging the sector as this covers every litre of beverage produced, whether or not sold.
Speaking at the meeting with one voice, the sectoral heads pointed out that the N10 per litre tax has become burdensome with the high cost of operation in the country and its constituent elements. This is already having devastating effects on the end cost to consumers. Considering their poor economic condition, an additional 20 percent will most certainly kill the sector.
They, therefore, called for the suspension of the excise tax being proposed by the Federal Government to forestall the collapse of the industry.
Corroborating this position, Corporate Affairs and Sustainability Director at Nigerian Bottling Company, Ekuma Eze said that the N10 per litre now in practice has no bearing on profitability for any of the members of the sectoral group.
He said that since the introduction of the N10 per litre excise tax, businesses in the sector have been experiencing a worrisome decline, adding that the average loss in volume and revenue is minus 10 per cent between June to September 2022, and it is estimated that the decline will further worsen to minus 25 per cent by December 2022.
