The carbonated soft drinks sub-sector of the Manufacturers Association of Nigeria (MAN) has raised the alarm over the federal government’s proposed 20 per cent ad-valorem excise tax on non-alcoholic beverages.
The MAN group was quoted as saying that the new policy would affect the widely consumed Carbonated Soft Drinks (CSD) segment.
According to agency reports, heads of the sectoral group rose from a meeting in Lagos on Friday and warned that the new tax policy if implemented, would spell doom for the sector. They noted that the prevailing N10 per litre tax regime was already crippling the sector with its biting negative impacts on their businesses.
Industry study already points to a eight-per cent revenue decline as a result of the government’s excise tax implementation. It is projected that the decline could hit 25 per cent by December 2022 if not reviewed. This excludes the cost of write-offs of products produced, excised but not sold.
With the proposed 20 per cent Ad-valorem tax introduction, the collapse of the soft drink market is imminent, the manufacturers argued.
‘‘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,’’ they said in a statement.
Some of the operators insisted they would wish to remain anonymous on the matter in the meantime for fear of victimisation.
“Most certainly, the additional 20 per cent will not only kill the sector but result in loss of revenue by the federal government, and a consequential phenomenal loss of jobs by various layers of the Nigerian workforce,’’ the source said in an email exchange.
This sectoral position was laid bare by the Soft Drinks Manufacturers Sub-sector of the MAN, which accounts for 33 per cent of the entire manufacturing sector in Nigeria.
Interestingly, the manufacturing industry contributes 15 per cent to the Gross Domestic Product (GDP) of the Nigerian economy, while the food and beverage sector contributes five per cent, and with a payment of N202 billion to the government on Value Added Tax (VAT), and N207 billion in Company Income Tax, an enormous amount that would be lost by the federal government if the sector is allowed to collapse, which will have a multiplier effect on infrastructural development and growth of the already troubled economy.
According to the Nigeria Bureau of Statistics (NBS), the food and beverage division of the economy in the last five years generated 1.5 million jobs – both direct and indirect.
It was only from 2020 that 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 are 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 the companies pay N10 for every litre of beverage produced, whether sold or not.
Speaking at the meeting, the sectoral heads decried the devastating effects of the N10 per litre tax, which has become burdensome with the high cost of operation in the country. This is already having devastating effects on the end cost to consumers, considering their poor economic condition; an additional 20 per cent 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, Nigerian Bottling Company (NBC), Ekuma Eze, also pointed out that the N10 per litre tax has no bearing on profitability for any of the members of the sectoral group.
He stated that since the introduction of the N10 per litre Excise Tax, businesses in the sector have been experiencing a worrisome decline.
According to him, the average loss in volume and revenue is 10 per cent between June to September 2022, adding that it is estimated that the decline will further worsen by 25 per cent in December 2022.