N10/litre excise duty may lead to 40% revenue drop in food, beverage industry ― MAN

The Manufacturers Association of Nigeria (MAN) has described the planned introduction of excise duty of N10 per litre on all non-alcoholic, carbonated and sweetened beverages, by the Federal Government, as capable of leading to a 0.43 per cent contraction in output, and about 40 per cent drop in total industry revenues in the next five years.

The association, in a statement, released on Thursday, and signed by its Director-General, Mr Segun Ajayi-Kadir, argued that the new excise, despite its potential overwhelming negative impact, was being motivated by potential revenue gains, rather than those reasons given by the government for its introduction.

While noting that the food and beverage industry had contributed significantly to the economy and taxes, despite the nation’s challenging business environment, introducing such duty, the association added, would amount to ‘leading the goose that lays the golden eggs to perdition’.

“The affected sub-sector has contributed most significantly to the economy and taxes, despite the debilitating impact of Naira devaluation, the inadequacy of forex and the COVID-19 pandemic.

“The food and beverage contributed the highest (38%) of the total manufacturing sector to the GDP! It comprises 22.5 per cent of manufacturing jobs and generates more than 1.5million jobs. So, this excise would certainly cast a sunset to this performance,” the association stated.

The group further argued that the revenue aspirations of the government in introducing the excise might not be justified, on the long run, since such gains would not be enough to compensate the corresponding government’s revenue losses in other taxes that might be experienced due to the introduction of such levy.

“The government is estimated to generate an excise tax of NGN NGN81bn between 2022 and 2025 from the group. This will not be sufficient to compensate the corresponding government’s revenue losses in other taxes from the Group.

“For instance, the corresponding effect of reduced industry revenue on government revenues is estimated to be up to NGN142bn contraction in VAT raised by the sector and NGN54bn CIT reduction between 2022 to 2025. This is not to mention the potential negative impact on manufactures/supply chain,” the statement read.

The association expressed the belief that such excise would lead to high production costs, which, in turn, would adversely affect production levels, and ultimately result in dwindling profits.

“Nigeria is the 6th highest consumer of soft drink but per capita consumption is low. Introducing excise will easily reduce production capacity causing manufacturers to struggle to meet investor commitments as well as cause investors to take investments to other countries,” it added.

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N10/litre excise duty may lead to 40% revenue drop in food, beverage industry ― MAN