*FG has no argument —Labour
*Industry will suffer output contraction, 40% revenue loss – MAN
*LCCI foresees job losses, seeks import prohibition
*Ill-timed, insensitive, inappropriate – Muda Yusuf
*It’ll have ripple effect, Isemede, former NACCIMA D-G
By Peter Egwuatu, Yinka Kolawole & Victor Ahiuma-Young
Stakeholders in the Nigerian economy have faulted the Federal Government on the introduction of excise duty of N10/liter on non-alcoholic carbonated and sweetened beverages, noting that the move will lead to contraction of production output, loss of industry revenue and ultimately loss of jobs.
FG has no argument — Labour
Organised Labour in the Food and Beverage sector under the aegis of National Union of Food, Beverages and Tobacco Employees, NUFBTE, said implementation of the new levy could cost not less than 15,000 direct and indirect job losses, including casuals and contract workers.
Acting General Secretary of the Union, Mike Olarewaju, said all arguments by government on imposition of the levy had been punctuated in a letter by NLC to President Buhari, Senate President, Speaker of the House of Representatives among others.
According to him, because of the negative consequences, President of Nigeria Labour Congress, NLC, Ayuba Wabba, recently petitioned President Buhari, Senate President, Speaker of the House of Representatives, and Minister of Labour and Employment warning against a re-introduction of excise duty on carbonated drinks.
His words: “We have rejected the new tax on carbonated drinks because of its huge negative impacts on our sector and workers. The worst of it will be that of job losses. These companies provide both direct and indirect jobs for Nigerians from permanent to casual employees, suppliers, distributors and retailers, and all these run into several millions. At least, it will cost us no less than 15,000 direct and indirect jobs, including casuals and contract workers.”
Speaking to Vanguard, President of NLC, Wabba, dismissed FG’s argument for imposing the levy.
We warned FG — Wabba
In a letter dated November 27, 2021, to President Buhari, which Wabba insisted on, when Vanguard contacted him yesterday, he argued among others, that: “Excise duties as indirect taxes on products automatically translate to cost transfer to the end consumers. The re-introduction of excise duties on non-alcoholic beverages would mean an astronomical price increase on the cost of carbonated drinks. These drinks are not luxury but essential food items for the ordinary person who can just consume a bottle of soft drink and a loaf of bread to keep hunger at bay for several hours.
“While we appreciate the fact that government needs more revenue to meet its statutory responsibilities, as a workers’ organization, we feel we have a duty to appeal to government that it should not kill the goose that lays the golden eggs just because it desires to harvest more eggs from the goose.
“The policy would push carbonated drinks producers to neighbouring countries as was the case with Dunlop and Nestle. This should not be the thinking of government when we need to do all we can to protect the jobs of Nigerians by keeping our industries.
“With 38 per cent of the entire manufacturing output in Nigeria and 22.5 per cent share representation of the entire manufacturing sector in Nigeria, the food and beverage industry is the largest industrial sub-sector in our country. The food and beverage sub-sector has generated to the coffers of government N202 billion as VAT in the past five years, N7.3 billion as Corporate Social Responsibility and has created 1.5 million decent jobs both directly and indirectly.
“The beverage sub-sector alone will lose 40 per cent of its current sales revenue. This translates to a loss of N1.9 trillion. While the government will only make total projected receipts of N81 billion from the proposed re-introduction of the excise duties, it will lose N197 billion in VAT, Company Income Tax and Tertiary Education Tax as a consequence of expected downturn in overall industry performance should the excise duties be effected as being planned.
Industry to suffer output contraction, 40% revenue loss – MAN
The Manufacturers Association of Nigeria, MAN, on its part, said the development would lead to a cut in the over 1.5 million jobs in the Food and Beverages industry and about 40 percent revenue drop in the next five years.
Director-General, MAN, Mr. Segun Ajayi-Kadir, noted that the industry is the highest contributor (38 per cent) of the manufacturing sector to the Gross Domestic Product (GDP).
He said: “The introduction of excise duty of N10/litre on non-alcoholic, carbonated and sweetened beverages, despite its potentially overwhelming negative impact, is rather unfortunate. There is no doubt that the potential revenue gains is the basis for the introduction of this excise
“It will appear that the goose that lays the golden eggs is being led to perdition, seeing that the affected sub-sector has contributed most significantly to the economy and taxes, despite the debilitating impact of Naira devaluation, inadequacy of forex and the COVID-19 pandemic.
“The Foods and Beverages sector contributed the highest (38 per cent) of the total manufacturing sector to the GDP. It comprises 22.5 percent of manufacturing jobs and generates more than 1.5million jobs. So, this excise duty would certainly cast a sunset to this performance.
“Furthermore, recent studies have shown that introducing excise on non-alcoholic beverages is likely to cause a 0.43 percent contraction in output and about 40 per cent drop in total industry revenues in the next five years.”
He further noted that the revenue aspirations of the government in introducing this excise duty may not be justified in the long run.
Govt’ll net N81bn, lose N142bn VAT
“The government is estimated to generate an excise tax of N81 billion between 2022 and 2025 from the group. This will 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 VAT raised by the sector and N54 billion CIT reduction between 2022 to 2025. This is not to mention the potential negatives,” he said.
On the impact on manufactures and supply chain, Ajayi-Kadir noted that the introduction of excise would lead to high production costs with adverse effect on production levels, and grossly impact the small and emerging business owners in the non-alcoholic beverage sector.
“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. This will have an unpleasant impact on employment, households and consumers,” he added.
LCCI sees job losses, seeks import prohibition
The Lagos Chamber of Commerce and Industry, LCCI, foresees job losses due to a reduction in production activities with the introduction of the excise duty, and called on the Federal Government to ensure better enforcement of prohibition of imported drinks to protect local production.
Director-General, LCCI, Dr. Chinyere Almona, said: “The immediate concerns are the likely increase in prices which may lead to a decrease in demand and, consequently, loss of jobs due to a reduction in production activities.
“The prohibition on imported drinks should be better enforced to protect domestic production from unfair competition in the face of the high cost of production in Nigeria.
“LCCI supports both the government’s revenue drive and the pro-health considerations of several stakeholders. We, however, recommend that the realised revenue from these levies be channeled into improving the country’s grossly inadequate health infrastructure.
“And beyond the levying of taxes on carbonated drinks to force a reduction in consumption, we urge the various public health agencies to regulate the production of sugary drinks to reduce their negative effect on human health.”
Ill-timed, insensitive, inappropriate – Muda Yusuf
Dr Muda Yusuf, CEO, Centre for the Promotion of Private Enterprise, CPPE, said the introduction of excise duty is ill-timed, insensitive and most inappropriate given the prevailing harsh economic and business conditions.
Yusuf, a former Director-General of LCCI, stated: “The citizens and the business community are experiencing a galloping and volatile inflationary condition which is unprecedented.
“It is also a negation of the economic recovery and job creation aspirations of the Federal Government. Many upcoming small businesses in the beverage sector will be hard hit by this proposal. The millions of micro-enterprises in the soft drinks’ distribution chain will be adversely impacted by the imposition of the excise tax. This is detrimental to the job creation and poverty reduction commitment of President Buhari.”
It’ll have ripple down effect, says Isemede, ex-NACCIMA D-G
Dr John Isemede, former Director-General, National Association of Chambers of Commerce, Industries, Mines and Agriculture, NACCIMA, while noting the negative effect of the new government policy, said: “The reintroduction of excise duty on carbonated drinks will have ripple-down effects on the economy.
“The consequence is that the volume of production of those beverages will drop because demand will be affected and hence, profits will as well drop. This may finally lead to reduction of workers and create further unemployment.
“However, it is not a crime to increase price but when government over-burdens people with taxes it will reduce volume and thus affect profitability at the end and government may not realise the budget target on taxation.”