The Centre for the Promotion of Private Enterprise has said that the N10 per liter excise duty imposed on non-alcoholic beverages will inflict more pains on Nigerians.
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, had said in January this year that excise duty would be imposed on non-alcoholic beverages which are manufactured locally.
The finance minister said the new measure is in line with the 2022 budget priorities which enables the government to introduce new sugar tax to raise revenue for health-related and other critical expenditures.
Nigeria ranks the 4th highest soft drink consuming country globally, with over 40 million litres sold yearly.
At the time when the Federal Government announced the new duty, the country was not faced with the current energy crisis.
Currently, the price of diesel has risen to N725 per litre, while inflation has been predicted to peak as a ripple effect.
Muda Yusuf, the Chief Executive Officer of the CPPE said it will be in the interest of Nigerians for the government to suspend the new duty.
In January after the announcement was made, manufacturers and those in the value chain had kicked against the sugar tax.
Industrial players believed that the duty will affect the value chain as the burden will be transferred to Nigerians.
Yusuf said, “These are very difficult times for manufacturers as they contend with escalating cost of production arising from elevated energy costs, rising operating expenses, sharp currency depreciation, forex market illiquidity, galloping inflation and numerous structural bottlenecks.
“They are also experiencing significant spikes in the cost of raw materials, cost of funds, high import duty, prohibitive cost of transportation and high cost of logistics.
“A huge proportion of these costs cannot be passed on to the consumers because of weak purchasing power and high consumer resistance.”
Nigerian manufactures are currently battling with foreign exchange scarcity as the rates between the official rate and the parallel rate continues to widen.
The Central Bank of Nigeria rate is at N416.45, while it trades at N680 per the United States dollar at the parallel market.
He said, “Given the strategic importance of manufacturing to the Nigerian economy, what the sector needs at this time is more stimulus, and not more taxes.
“The cost of diesel has risen by close to 200 percent in the past few weeks. It was at an average of N288 per litre in January this year and jumped to as high as N625 per litre in some locations.
“The cost of gas is similarly on the increase and there are also sharp increases in electricity tariffs.
“Several manufacturers are not able to import vital raw materials because of forex scarcity, a situation which is severely inhibiting their production and productivity. Many are forced to source forex from the parallel market at exorbitant rates.”
The CPPE boss said Nigerian manufacturers are still struggling to recover from the shocks of the Covid-19 pandemic and the subsequent economic recession.
He lamented that the manufacturing sector contribution to Gross Domestic Product is still less than 10 per cent.
Yusuf said, “Manufacturers are struggling with unfair competition, especially from products imported from Asia which have flooded the Nigerian market, largely because of the porosity of the borders. These imports are often much cheaper than goods produced locally.
“The cost of logistics has continued to be on the upward trend, driven largely by the state of the roads, the limited freight capacity of the railway system, the crisis at the major ports, the traffic gridlock around the Lagos ports and extortions in the logistics chain.
“The manufacturing sector offers good prospects for job creation and lifting more Nigerians out of poverty in line with the government aspirations.
“But if the burden of tax becomes excessive and unbearable on this critical sector the realization of these outcomes by the government would be difficult.”