NECA asks FG to suspend N10/litre excise duty on carbonated drinks

The Nigeria Employers’ Consultative Association (NECA) says the federal government should suspend the new excise duty of 10/litre on carbonated drinks.

NECA said this in a statement released over the weekend, urging the government to consider the interest of Nigerians and the economy.

The association is the umbrella body of all employers’ groups in Nigeria.

The group asked that the government continue to support the manufacturing industry to attain full recovery after the onslaught of the COVID-19 pandemic.

NECA stated that the contents of the 2022 Appropriation Act (budget) and Finance Act 2021 could lead to challenges — by increasing the number of industrial actions, job losses and rising unemployment.

“We may recall that in 2009 during the global financial crisis, excise duties on carbonated drinks were suspended to aid the sustainability of businesses. We make bold to say that the economic situation which necessitated the suspension of the excise in 2009 has not abated, but rather, worse. In fact, businesses currently face greater hardship than what obtained in 2009,” the statement reads.

“Thus, the introduction of the tax will be counter-productive as it will lead to further stifling of businesses in the manufacturing industry. It will result in reduction of the purchasing power of the masses as any increase in price will likely be passed to the consumers. 

“Globally, at a time like this, governments continue to provide incentives for industries to speed up recovery from the shocks of the COVID-19 pandemic, inflation and escalating costs. 

“Nigeria cannot afford to be doing the exact opposite as manufacturers, across all product segments need a respite, especially in the light of the unprecedented increase in production and operating costs.

“It is instructive to note that manufacturers in the country have been contending with the dislocations caused by the pandemic and the recession that followed. They are also facing serious crises resulting from liquidity challenges in the foreign exchange market, which is impacting adversely on the cost of production, sales, turnover, profitability and shareholder value.

“In addition, they are confronted with intense pressure arising from numerous structural bottlenecks that are creating sustainability challenges for investors, especially those in the SME segment. Further, there are concerns with the significant spike in the cost of raw materials, investment capital, high import duty, energy, transportation and logistics/shipping, among others.

“Rather, the government should continue to support and promote the industry to attain full recovery after the onslaught of the pandemic and position it to further accommodate the teeming unemployed Nigerians, particularly the youths.”

The group added that an agile business environment is needed for the private sector to participate and support government’s development plan (2021-2025).

“A further hike in Value Added Tax, VAT, would only increase the revenue of government temporarily, as this would further translate to a reduction in consumption for some items, loss of jobs to workers in the production value chains of those items as well as negatively impact overall government revenue projections, etc,” the statement added.

“As we aligned our thoughts with the aspiration of the current administration in the removal of fuel subsidy, as the current subsidy regime is not sustainable, with the subsidy payment hovering around N150 billion monthly and around N2 trillion annually, with the removal of subsidy, the funds that would be saved could help address the wide infrastructural deficits and other gaps in the country.

“We urge the government to urgently initiate a deepened engagement with critical stakeholders including employers and organised labour with the view of arriving at a more realistic strategy to cushion the effects of the subsidy removal on workers, employers and the generality of Nigerians. Past efforts at providing palliatives have proved to be cosmetic, shallow and unsustainable. 

“We state that fuel subsidy removal based on the argument of international oil prices and other parameters without considering the context of those climes will be unrealistic within the context of our environment.”