Court rules against implementation of excise duty on carbonated drinks

A federal high court in Abuja has ruled against the excise duty on carbonated drinks introduced by the federal government, declaring the move invalid.

The ruling follows a suit filed in 2022 by the Nigeria Employers’ Consultative Association (NECA) after the federal government introduced an excise duty of N10 per litre on nonalcoholic, carbonated, and sweetened beverages.

The tax, otherwise called ‘sugar tax’, was meant to discourage excessive consumption of sugar beverages which is said to contribute to diabetes, obesity and other health issues.

However, NECA, representing the interests of businesses, challenged the circular, arguing that it was unjustifiable.

Wale Edun, the minister of finance, and Bagudu, the minister of budget and national planning, were named as part of the defendants in the suit.

In a statement on Monday, NECA announced that Justice O.A. Egwuatu of the federal high court rejected the preliminary objection of the ministry of finance due to lack of merit, following three years of intense legal proceedings.

“Delivering judgment on the substantive case, the court held in summary that the circular issued by the 2nd Defendant (Federal Ministry of Finance) is invalid and ultra-vires stating that the powers of the 2nd Defendant; and the 1st Defendant (the Customs Service) is not entitled to demand transport and feeding allowances from the plaintiffs (NECA members),” the statement reads.

“The court further declared that the circular entitled “Approval for the Implementation of 2022 Fiscal Policy Measures and Tariff Amendments,” dated March 1, 2022 issued by the 2nd Defendant (Honourable Minister of Finance, Budget and National Planning) is invalid and ultra-vires the powers of the 2nd Defendant.”

Following the judgment, Adewale Smatt-Oyerinde, the director-general of NECA, described it as a victory for organised businesses in Nigeria against “official arbitrariness and unfortunate attempts to impose additional burdens on businesses.”

On July 17, 2024, Edun said the federal government is considering a temporary suspension of the sugar tax.

The minister said the potential temporary suspension is under a six-month economic stabilisation plan.