NLC Says FG’s Tax on Non-Alcoholic, Carbonated, and Sugary Drinks a Grave Mistake

The Nigeria Labour Congress (NLC) has kicked against the federal government’s introduction of excise duties on non-alcoholic, carbonated, and sugary drinks produced within the country. The organized labour group said the action is a grave mistake and a declaration of war on Nigerians. They urged the government to reverse the introduction of N10 per litre on soft drinks before it crumbles the economy.

The Minister of Finance, Budget, and National Planning, Zainab Ahmed, had on Wednesday announced the introduction of excise duty on sweetened beverages during her presentation of the 2022 budget in Abuja.

Apart from the NLC, the Manufacturers Association of Nigeria (MAN) also warned that the new tax will turn foreign investors away and raise the prices of soft drinks beyond the reach of the average Nigeria. MAN’s director-general, Segun Ajayi-Kadir, said the duty will lead to the collapse of the manufacturing sector and it will be tantamount to killing the goose that lays the golden eggs.

The NLC’s president, Ayuba Wabba, in a statement titled “Nigerian Workers Reject Imposition of Excise Duties (Indirect Tax) on Locally Produced Carbonated Drinks” said President Muhammadu Buhari’s signing of the Finance Act into law should be amended to revise the taxation on soft drinks since failure might cause a breakdown of industrial relations in the manufacturing sector and the entire country.

While Wabba agreed that the government’s reason for introduction the indirect tax on soft drinks – to curtail the rising cases of obesity and diabetes – is commendable, he stated that the government ought to have levied the tax on sugar as a product. He said the NLC wrote to the presidency to shift its stance on the issue without success, and that this will impact Nigerians negatively.

“Congress was also alerted by the complaint of manufacturers of soft drinks in Nigeria that the re-introduction of excise duties would lead to very sharp decline in sales, forced reduction in production capacity, and a certain roll back in investments with the certainty of job losses and possibly shut down of manufacturing plants,” Wabba revealed.

He warned that major manufacturers such as Dunlop and Michelin as well as Cadbury among others relocated to neighbouring Ghana because of the unfavourable climate for doing business in Nigeria, adding that such situation may play out again with other major producers in the 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 NLC president stated. “There is thus no gainsaying the fact that the industry is a golden goose that must be kept alive.”

Ajayi-Kadir reiterated almost the same facts, adding that the introduction of N10 per litre of non-alcoholic, carbonated, and sugary drinks will cause significant loss of revenue to the government unless it is reversed.

“The revenue aspirations of government in introducing this excise may not be justified in the long run,” the MAN president said. “The government is estimated to generate an excise tax of N81bn 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 N142bn contraction in VAT [Value Added Tax] raised by the sector and N54bn CIT [Company Income Tax] reduction between 2022 to 2025. This is not to mention the potential negative impact on manufactures/supply chain.”