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Soft-Drink Tax: Experts Predict Hyperinflation, Job Loss

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  • Soft-Drink Tax: Experts Predict Hyperinflation, Job Loss

Following the plans by the Federal Government to impose Value Added Tax (VAT) on carbonated drinks, soft drinks and other important products, Financial experts have warned that it will not only have an effect on the company but will lead to loss of jobs in the country.

Recall that the Minister of Finance, Budget and National Planning, Zainab Ahmed while in Washington DC, USA, for the 2019 Annual Meetings of the International Monetary Fund and World Bank, said plans are underway to increase the country’s revenue by introducing excise duties on certain items.

“We are also looking at introducing excise duties on some categories of products especially carbonated drinks and VAT on some categories of imports into the country. But it is not all taxes increases, there is also a proposal to build tax rates for SMEs we also increase the minimum tax level to make it easy for people to plan their taxes,” Ahmed had said.

Reacting to the move, The Nigeria Employers Consultative Association (NECA), Lagos Chamber of Commerce and Industry (LCCI), Manufacturers Association of Nigeria (MAN) and others in separate statements expressed worries on the effect, saying many shops will close, Nigerians will lose their jobs and the inflation rates will also rise.

NECA’s Director-General, Timothy Olawale, said adding another tax to the existing ones will only ruin businesses.

“In our considered opinion, reintroduction of excise tax on non-alcoholic beverages should not be the case. With the myriad of taxes and levies already being paid by businesses, the reintroduction of excise in a sector with high price elasticity means that government is desirous of killing businesses in the sector completely.

He explained that “once prices are increased, consumers will push back, resulting in sharp decline in demand. With the planned increase in VAT, the introduction of excise will further burden operators in the sector with the following consequences: low demand leading to unsold products; incomes squeeze on businesses that are already struggling with low margin and massive staff layoff, which will affect over 250,000 direct and indirect employees in the sector among others.”

On his part, the Director-General of the LCCI, Mr Muda Yusuf opined that “any imposition of tax on carbonated drinks will definitely affect the demand for such products. Such imposition of tax would be another tax apart from the excise tax already paid by the manufacturers of such products.

“Ultimately, the demand for such products might drop due to the attendant increase in price that might occur. Those who could buy would buy at a higher price.”

Also, former President, Association of National Accountants of Nigeria (ANAN), Dr Sam Nzekwe noted that if the FG’s plan is implemented, there will be higher inflation rates.

“If this plan of government to tax soft drinks is implemented, then we should be ready for higher rates of inflation. Already, we have high inflation,” he stated.

He added that “the taxes from the federal and state governments are becoming too many that you don’t know where to place them. Coming up with a new tax regime on soft drinks, I don’t think that is what will solve the funding challenges confronting the budget.”

The Chairman, Food, Beverage and Tobacco subsector of the Manufacturers Association of Nigeria (MAN), Mr Paul Gbededo said, “imposing tax on soft drinks will impact the poor and the masses. Soft drink is what the poor drink to get energy. If government is looking for additional revenue from taxation, the masses will support taxation of luxury items.

“I am aware that it is fashionable to control sugar intake because of health reasons, but we are not there yet. The poor need the sugar because that is where they derive their energy from. If the government is worried about sweetener intake among Nigerians, they can express this through education, telling people the disadvantages of consuming such substance.”

“The cost of doing business in Nigeria is already high; it (excise duty) will further increase the cost. That is why I think it has to be very marginal in order not to discourage new investors who want to come into the industry or make existing investors move to other countries,” A former Director-General, West African Institute of Financial and Economic Management, Prof Akpan Ekpo stated.

Dr Bongo Adi, An economist and Senior Lecturer, Lagos Business School, admitted that “the government is trying to ramp up tax revenue; the truth of the matter is that tax is low in Nigeria. But I don’t know why they need to discourage the consumption of soft drinks.

“If you impose excise duty on a commodity that is price-sensitive, the demand will immediately drop as consumers will find alternatives.”

“I think the way to raise tax is first by growing the economy. I have always maintained that this issue of tax is coming at a very wrong time. Our post-recession GDP is less than two per cent, and we are taking measures that will further endanger the growth of the economy,” he added.

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Dangote Refinery Raises Diesel Price to N1,100/Litre Due to Naira-Dollar Crash

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Dangote Refinery has announced an increase in the price of Automotive Gas Oil (diesel) from N940 per litre to N1,100 per litre.

This significant adjustment in pricing reflects the refinery’s efforts to mitigate the impact of currency depreciation on its operations.

The decision to raise the price of diesel comes amidst ongoing challenges in the foreign exchange market, with the naira experiencing a downward spiral against the dollar in recent weeks.

The refinery cited the unfavorable exchange rate as the primary driver behind the price hike, signaling the intricacies of operating in a volatile economic environment.

It is worth noting that just a few weeks ago, on April 24, 2024, Dangote Refinery had announced a reduction in the prices of diesel and aviation fuel to N940 per litre and N980 per litre, respectively.

This move was aimed at responding to calls from oil marketers for a reduction in diesel prices, demonstrating the refinery’s willingness to adapt to market dynamics.

However, the recent depreciation of the naira has necessitated a reversal of this downward trend, prompting Dangote Refinery to adjust its pricing strategy accordingly.

Some dealers reported purchasing diesel from the plant at even higher rates, reaching up to N1,200 per litre for those procuring lesser volumes.

Abubakar Maigandi, the National President of the Independent Petroleum Marketers Association of Nigeria, attributed the price increase to the rising exchange rate, as communicated by the refinery.

He emphasized the direct correlation between currency fluctuations and the cost of imported commodities, such as crude oil, which forms the basis for diesel production.

While officials of the refinery have remained tight-lipped on the matter, industry sources and major marketers have corroborated reports of the price adjustment.

Chief Ukadike Chinedu, the National Public Relations Officer of IPMAN, echoed similar sentiments, highlighting the adverse impact of the naira’s depreciation on refined product prices.

The recent fluctuations in the naira-dollar exchange rate underscore the challenges facing Nigeria’s economy, with implications for various sectors, including energy and transportation.

Despite initial signs of stability earlier in the year, the naira’s recent depreciation has reignited concerns about inflationary pressures and economic uncertainty.

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Nigeria-Indonesia Trade Surges to $4.7 Billion in 2022, NICCI President Reveals

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The trade volume between Nigeria and Indonesia rose to $4.7 billion in 2022, according to Ishmael Balogun, the President of the Nigerian-Indonesian Chamber of Commerce and Industry (NICCI).

This revelation came during a recent press conference convened to announce the upcoming Nigeria-Indonesia Investment and Trade Forum, scheduled to be held in Kano.

Balogun, speaking with enthusiasm, underscored the pivotal role played by NICCI in fostering bilateral trade and investment between the two nations.

“Our vision at NICCI is to promote robust economic ties between Nigeria and Indonesia, positioning Nigeria as the premier investment destination in Africa,” he declared.

Highlighting Nigeria’s burgeoning position as Indonesia’s foremost trading partner on the African continent, Balogun emphasized the mutually beneficial nature of the relationship.

“Nigeria holds the distinction of being Indonesia’s number one trading partner in Africa, a testament to the strength and vitality of our economic cooperation,” he stated.

NICCI’s commitment to nurturing this partnership extends beyond mere rhetoric, as Balogun elucidated the chamber’s proactive approach to facilitating trade engagements.

“We are resolute in our efforts to bolster interactions between Nigeria and Indonesia through various platforms such as trade forums, fairs, and bilateral symposiums,” he affirmed.

The forthcoming Nigeria-Indonesia Investment and Trade Forum, slated to convene in Kano, represents a pivotal opportunity to further deepen economic collaboration.

Themed ‘Indonesia meets Nigeria: An opportunity for expansion of Bilateral Investment and Trade’, the event promises to be a catalyst for enhanced trade relations and investment inflows.

Reflecting on the evolution of the forum, Balogun reminisced about its inaugural edition held in Jakarta, Indonesia, in October 2022, followed by a successful second edition in October 2023.

This year’s edition seeks to broaden the scope by inviting Indonesian companies to explore the vast potential of the Nigerian market.

Balogun expressed gratitude for the collaborative efforts between NICCI and the Indonesian Embassy in Nigeria, under the leadership of Ambassador Dr. Usra Harahap, as well as the Indonesian government’s Ministry of Trade and Foreign Affairs.

Together, they have orchestrated the invitation of 70 Indonesian companies to participate in the upcoming forum, symbolizing a tangible commitment to fostering bilateral trade and investment.

As Nigeria and Indonesia forge ahead in their economic partnership, the surge in trade volumes serves as a testament to the growing synergy between the two nations.

With NICCI spearheading initiatives to bolster economic cooperation, the future holds promising prospects for further expansion and prosperity on both fronts.

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Dry Cleaners Set to Tap into $165 Billion Global Cleaning Industry

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The Fabric Professionals and Dry Cleaners Association of Nigeria (FPDA) is gearing up to host the “Clean Show Africa 2024” conference.

This conference aims to expose over 25,000 dry cleaners to the vast opportunities present in the global cleaning and hygiene industry, valued at a staggering $165 billion.

Scheduled to take place on May 28–29, 2024, in Lagos, the event is themed “Positioning Africa’s fabric and hygiene industry for excellence.”

It comes at a crucial time when Nigeria’s dry cleaning industry is experiencing steady growth, with projections indicating a 6.4% annual increase over the next decade.

According to Enibikun Adebayo, Chairman of FPDA, Nigeria’s dry cleaning industry was valued at $8.4 million in 2019.

However, this figure is expected to rise significantly, presenting a ripe opportunity for stakeholders to tap into.

Adebayo emphasized the importance of collaboration within the industry to fully leverage its potential.

“A year ago, we launched FPDA of Nigeria. We are also using the platform to educate our members to be better professionals,” stated Adebayo, highlighting the association’s commitment to enhancing professionalism and standards within the sector.

The conference will shine a spotlight on women in the dry cleaning business, recognizing their pivotal role in driving the industry forward. Reports have shown that dry cleaning businesses are often better managed by women, and the event aims to provide them with the necessary support and resources to thrive.

Ruth Okunnuga, Managing Director of Wasche Paint Nigeria, expressed the need to revolutionize Nigeria’s dry cleaning and laundry industry, emphasizing the lack of proper structure and investment.

She stressed the importance of data collection for effective planning and growth within the sector.

Joseph Oru, Managing Director of Zenith Exhibition, highlighted the conference’s objective of engaging the Federal Government to establish training institutions for dry cleaners. Such institutions would play a crucial role in equipping professionals with the skills and knowledge needed to meet global standards.

As Nigeria’s dry cleaning industry prepares to tap into the vast opportunities offered by the global cleaning market, the Clean Show Africa 2024 conference stands as a pivotal platform for collaboration, innovation, and growth within the sector.

With a focus on excellence and professionalism, stakeholders aim to position Nigeria as a key player in the dynamic and lucrative cleaning and hygiene industry.

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