The proposed re-introduction of excise duty on carbonated drinks by the Nigeria Customs Service (NCS) is causing huge controversy in the manufacturing sector.
This was as industry stakeholders have warned that government’s proposed plan to tax soft drinks was capable of killing manufacturing companies producing them thereby leading to loss of jobs in the country.
The Comptroller-General of the Nigeria Customs Service (NCS), Gen. Hameed Ali, retd, had at the recent 2022–2024 Medium Term Expenditure Framework (MTEF) with lawmakers, requested that the Federal Government should lift tax waivers for companies producing soft drinks, which include, carbonated drinks, water, plastics, and tiles among others within the country.
But as the duty reintroduction excise gains momentum, Nigeria’s Organised Private Sector (OPS) has strongly condemned the proposal, describing it as ill timed.
Experts said the collection of excise duty on the products would increase the cost of production, as final consumers will be made to bear additional burden with the excise duty. If government should enforce the collection, many manufacturers will shut down and push their workers away.
Investigations reveal that some companies producing soft drinks are planning to exit the country and relocate to neigbouring countries due to high cost of production, harsh operating environment and the proposed excise duty on carbonated and non-carbonated drinks if it scales through.
At a recent business discourse for instance, the Manufacturers Association of Nigeria (MAN) revealed the proposed re-introduction of excise duty collection on non-alcoholic drinks would see producers of the items lose up to N1.9 trillion in sales revenue between 2022-2025.
Chairman of Fruit Juice Producers branch of MAN, Mr. Fred Chiazor, said the losses indicate a 39.5 per cent loss due to imposition of the new taxes with concomitant impact on jobs and supply chain businesses.
Chiazor argued that the tough economic situation in the nation presently should see the government introduce fiscal palliatives and tax rebate instead of introducing excise duty collection.
In the same vein, MAN called for the suspension of the fiscal policy, even as it noted that the proposed excise duty collection would shrink the sector’s contribution to the GDP, currently at 35 per cent of manufacturing.
Meanwhile, the President of Water Producers Association of Nigeria (WAPAN), Mr. Mackson Odiri Egberi, argued that the move to collect excise duty on water would see the product go beyond the reach of the ordinary citizens.
According to him, the chemicals used by water producers as well as the sachets are imported and subject to import duty payments, lamenting that excise duty collection would be an additional burden on producers that would force them to shut down or compromise on their standards.
The former member Presidential Taskforce on the Reform of Nigeria Customs Service; Presidential Committee on Destination Inspection and Ministerial Committee on Fiscal Policy and Import Clearance Procedure, Lucky Eyis Amiwero, said duties and revenues are not things that help a nation.
According to him, if some of the manufacturing industries close down, the revenue will be useless, adding that the excise duty was previously cancelled to be able to sustain the industry.
“I think Customs should reduce their quest for revenue and understand what economy means. For now, I don’t think we need revenue. What we need is how do we sustain those industries so that they would not close down.
“When you impose this duty on carbonated drinks, it is going to affect the common man. The people taking all these things are not the rich but the common people.
“And, for instance, if you want to raise it, the manufacturers will raise their prices once you start to collect excise duty on that because there are import components that have been paid,” he said.
He said most of materials used to produce these products are imported and Customs are collecting import from the excise duty because the materials are not sourced locally.
He said that this is not the right time to talk about the reintroduction of excise duty on these items, adding that they should look at other countries, who are giving subsidies and concession because of COVID-19 under the present economic situation.
“For now, the exchange rate is high and is driving people out of the country. Nigeria exchange rate is moving people out of the country and businesses because the exchange rate is not stable,” he said.
He noted that the exchange rate is becoming unpredictable, inconsistent and not transparent for people to really go into import, saying the collection of excise duty is not the best because the exchange rate has not stabilised the system.
“There is need for Customs to make impact assessment instead of talking about revenue. Definitely, the policy is not the best for a country that is not investment friendly. Investment is what we need and that is what other countries are doing.
“We should not look at revenue at the detriment of closing down many companies and shutting down the consumption right of the poor. Most of these carbonated drink are actually things the poor are rely on such as Coke, Fanta and all the rest,” he said. He added that it is not the best to start collecting excise duty on those items now even no country is doing that now, adding that countries are trying to see how they can subsidise things so that their economy will work.
He said that it is not the best to start collecting excise duty on those items now even no country is doing that now, adding that countries are trying to see how they can subsidise things so that their economy will work.
“There is need to encourage those companies and this is not the right time to introduce excise duty based on the way the exchange rate is moving up everyday.”