‘Unpleasant impact on revenue, employment’ — MAN kicks against new tax on carbonated drinks

The Manufacturers Association of Nigeria (MAN) has kicked against the introduction of excise duty on all non-alcoholic, carbonated and sweetened beverages.

Segun Ajayi-Kadir, MAN director-general, said this on Wednesday while speaking with journalists in Lagos.

Earlier on Wednesday, Zainab Ahmed, minister of finance, budget and national planning, announced the new policy during the public presentation of the 2022 budget.

With the policy, the prices of carbonated drinks may spike across the country.

Commenting on the development, Ajayi-Kadir said the new excise duty would cause a 0.43 percent contraction in output and about 40 percent drop in total industry revenues in the next five years.

He explained that food and beverages contributed the highest at 38 percent of the total manufacturing sector quota to the nation’s gross domestic product (GDP).

He added that the sector comprised 22.5 percent of manufacturing jobs and generated more than 1.5 million jobs.

“One is particularly worried about the ripple effect on the introduction of the excise, despite strenuous evidence-based advice to the contrary,” NAN quoted him as saying.

“This will have an unpleasant impact on employment, households and consumers.

“As seen from previous impact analysis, excise affects production outputs, revenues and profits.

“This causes companies to pursue cost-cutting measures to reduce the effect of diminishing revenue and profits by reducing employee salaries or retrenchment.

“So, this excise would certainly cast a sunset to this performance.”

The director-general stated that the revenue aspirations of the government in introducing the new tax may not be justified in the long run.

He noted that the excise estimated to generate N81 billion between 2022-2025 would 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 N142 billion contraction in value-added tax (VAT) raised by the sector and N54 billion corporate income tax reduction between 2022 to 2025.

“This is not to mention the potential negative impact on manufacturers/supply chain.

“Nigeria is the 6th highest consumer of soft drink, but per capita consumption is low.

Ajayi-Kadir also said the new excise duty would “easily reduce production capacity”, causing manufacturers to struggle to meet investor commitments.

According to him, this would make investors take their investments to other countries.

“A decrease in production levels or ability to purchase raw materials as a result of the introduction of excise tax will result in reduced profits for the supply chain players in the non-alcoholic beverage sector,” he added.

“What is not realized by many is that excise begets high production costs which in turn adversely affect production levels and intimately results in dwindling profits.

“This will grossly impact the small and emerging business owners in the non-alcoholic beverage sector.”