Manufacturers to lose N1.9trn in 3 years as FG mulls excise duties

The proposed re-introduction of excise duty collection on non-alcoholic drinks would see producers of the items lose up to NGN1.9trillion in revenue sales between 2022 – 2025.

Manufacturers Association of Nigeria (MAN) revealed this on Tuesday at the MMS Business Discourse themed: “X-raying the Proposed Excise Duty Regime for Carbonated Beverages in a Recovering Economy.”

Speaking at the event, the Chairman of Fruit Juice Producers branch of MAN, Mr. Fred Chiazor, stated that the losses indicate a 39.5% loss due to imposition of the new taxes with concomitant impact on jobs and supply chain businesses.

The group called for a suspension of the fiscal policy, even as it noted that the proposed excise duty collection will shrink the sector’s contribution to the GDP which is currently represents 35% of manufacturing.

“Government could lose up to N197billion in Value Added Tax (VAT), EIT fund and Collective Investment Trust (CIT) revenues occasioned by the drop in industry performance,” the MAN representative said.

He 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.

Earlier, the Comptroller-General of Nigeria Customs Service (NCS), Col. Hammed Ali (Rtd) stated that with the wide production and consumption of carbonated non-alcoholic drinks locally, there is a strong indication that it will trigger a significant revenue rise from excise duty when brought under excise control.

Ali, who was represented by the Controller, Lagos Industrial Command, Comptroller Monica Shaahu, presented a paper titled, “Merits and Demerits of Excise Duty in a COVID-19 Recovering Economy.”

Comptroller Shaahu noted that bringing the carbonated non-alcoholic and alcoholic drinks under excise control will cushion the effects of the overdependence on oil/ import duty revenue occasioned by global economic response to COVID-19.

“Away from the revenue view, the health and environment hazards presented by the production and consumption of carbonated drinks will be ameliorated bringing them under regulation and control. Excise traders under the new regime are likely to think of exportation to enjoy the duty free delivery incentives from the federal government thereby attract more Forex to the economy.”

“Given the lesson learnt from the impact of Covid 19 and its effects; many nations of the world have re-strategized their economic system in a more diversified way to achieve a robust, stable and prosperous economy with a long term benefit.

“Hence; bringing carbonated drinks under Excise control this time will raise government revenue, reduce health hazards and align Nigeria with harmonization of the ECOWAS member – states. For instance; Coca Cola the largest conglomerate which produces carbonated drinks pay Excise Duty in other host countries apart from Nigeria. This is unhealthy economy advantage for their products coming from other nearby countries.”

She, however, noted that in the short term the new excise regime may present not temporary hardship to the excise traders that hitherto didn’t pay duties. “Invariably, job losses and maybe possible price hike which will affect the final consumers may occur,” she opined.

On his part, 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.

Mackson argued that the chemicals used by water producers as well as the sachets are imported and subjected 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.

A member of the Nigerian Economic Summit Group (NESG), Dr. Ikenna Nwosu advised that the initiative be shelved for a minimum of one year to allow for robust discourse with industry stakeholders on the possible gains and shortcomings of the policy.

Nwosu posited that the one year waiting period would also enable the nation’s economy, especially its manufacturers recover from the debilitating effects of the COVID-19 pandemic.

He argued that most global economic bodies including the International Monetary Fund (IMF) and World Trade Organization (WTO) have been advising governments to suspend taxes for one year as part of efforts to support their businesses amid the global fiscal challenges.

Earlier, the Executive Secretary of Nigerian Shippers’ Council (NSC), Hon. Emmanuel Jime stated that the new excise duty regime wouldn’t affect Nigeria’s competitiveness with the African Continental Free Trade Agreement (AfCFTA).

Jime, who was represented by the Council’s Director of Consumer Affairs, Chief Cajetan Agu, encouraged industry stakeholders to be more concerned about other logistics infrastructure challenges that puts Nigeria in a disadvantageous position for the regional trade.

“AfCFTA is a a rule-based market. Instead of focusing on the issue of local taxes, we should on Nigeria’s area of advantage. What’s the level of automation at Nigerian ports? Are there scanners Nigeria isn’t connected to other nations via rail. Is there a sound logistics platform in the country to support AfCFTA?” the NSC boss queried.