November 30, 2022

TAX BURDEN: Beverages sector revenue to decline 40% 

By Cynthia Alo 

The Manufacturers Association of Nigeria, MAN has said that the Nigerian beverage subsector will decline by 40 percent and lose N1.9 trillion in sales revenue in the next five years under the current tax burden.

Director-General, Manufacturers Association of Nigeria (MAN), Mr. Segun Ajayi-Kadir, who gave this information while reacting to the Federal Government’s proposed additional 20 percent ad-valorem tax on carbonated drinks, CSD.

Also speaking on the N10 per litre excise tax on CSD, Kadir affirmed that the new tax regime is likely to cause a 0.43 percent contraction in output.

He stated: “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 for the corresponding government’s revenue losses in other taxes from the Group.

“This will have an unpleasant impact on employment, households and consumers, a further cut in jobs for an industry that employs over 1.5 million people, directly and indirectly.

‘‘Sadly, there is news of a proposed 20 percent ad-valorem tax on non-alcoholic beverages which prompted the sectoral heads of the CSD sub-sector of the Manufacturers Association of Nigeria (MAN) to cry out, condemning it in its totality as it will lead to the eventual collapse of the sector.

“Interestingly, the manufacturing industry contributes 15 percent  to the Gross Domestic Product (GDP) of the Nigerian economy, while the food and beverage sub-sector contributes 5 percent’’.

The current tax environment, according to stakeholders, would affect companies like the Nigerian Bottling Company, a local subsidiary of Coca-Cola, 7-Up Bottling Company, Rite Foods, makers of Bigi drinks, and Nestle Nigeria Plc among many other huge employers in the CSD segment.

Speaking on the issue, Investment and financial analyst, Mr. Olufemi Awoyemi,  asserted that the new Ad-Valorem or percentage tax would put downward pressure on sales by an estimated -16 percent.