Newly Imposed Excise Duty of N10 Per Litre On Carbonated and Non-Alcoholic Drink Will Hurt Demand and Lead To Job Loss – LCCI and NLC
The Lagos Chamber of Commerce and Industry (LCCI) and Nigeria Labour Congress (NLC) reject the federal government’s newly imposed excise duty of N10 per liter on all Non-alcoholic, carbonated and sweetened Beverages.
Excise duty is a tax imposed on the manufacture, sale, or consumption of some selected products such as alcoholic drinks, tobacco and petroleum products. it is an indirect tax, causing the manufacturers or producer to recover their loss by raising the price of their goods.
At the public presentation of the approved 2022 FGN budget last week, the minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed said, “there is now Excise Duty of N10 per liter imposed on all non-alcoholic, carbonated and sweetened beverages. This is to discourage excessive consumption of sugar in beverages which contributes to diabetes, obesity, etc.
“The new ‘Sugar Tax’ introduced is also to raise excise duties and revenues for health-related and other critical expenditures. It is in line with the 2022 budget priorities.”
This new development was not welcomed by LCCI and NLC, the two bodies request the government to reconsider its decision as this newly imposed excise duty will have an adverse effect on the economy. Reminding the federal government of the two giant tyre manufacturing companies, Dunlop and Michelin, which were forced to relocate to neighboring countries as a result of epileptic power supply that dragged on their cost of production.
It is believed that a similar situation might play out, resulting in the relocation of non-alcoholic and carbonated companies to neighbouring countries.
In a statement released last week, the Director-General of LCCI, Chinyere Almona, said the newly imposed excise duty on carbonated and non-alcoholic drinks would have a ripple effect on the demand and prices of affected commodities which will affect domestic producers and in turn result in job loss dues to the potential reduction in production activities.
Chinyere said, “the federal government has announced it will charge an excise levy of N10 per litre on all non-alcoholic carbonated sweetened beverages to discourage excessive sugar consumption and boost revenue.”
“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.”
This policy will increase the price of carbonated drinks across the country and “impose immense hardship on ordinary Nigerians who easily keep hunger at bay with a bottle of soft drink and maybe a loaf of bread.”
Speaking further, the LCCI recommended an upward review of the budget allocation to the country’s health sector.
“We, however, recommend that the realized revenue from these levies be channeled into improving the country’s grossly inadequate health infrastructure. The allocation to the health sector in the 2022 federal budget of N463bn should be reviewed upward to the region of a trillion naira invested into the sector in the next ten years.
“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.” The chamber said.
According to Chinyere, adopting the new excise duty is inevitable if the federal government insists to enforce the new “sugar tax”. She said, “If the President insists he wants it, we have to oblige him,” she said.
In a statement released by NLC and signed by Comrade Ayuba Wabba, the union said its concern about the newly imposed excise tax is the mass hunger that would result from the potential increase in the retail price of soft drinks which will be beyond the reach of many Nigerians.
The union further explained that the increase in the price of non-alcoholic and carbonated drinks would push some Nigerians to resort to consumption of substandard and unhygienic drinks as substitutes for carbonated drinks which will put them at risk of serious health challenges.
If this happens, it will negate the federal government’s objective to discourage over-consumption of sugar and check obesity.
NLC full statement:
On the 31st of December 2021, President Muhammadu Buhari signed into law the Finance Act. Some of the provisions of the Finance Act include the imposition of excise duties on locally produced non-alcoholic, carbonated, and sugary drinks.
The reason offered by the government for this decision was to discourage the consumption of sugar by Nigerians as it has led to an upsurge in obesity and diabetes. In a letter dated 27th November 2021, the Nigeria Labour Congress wrote to the President and Commander-in-Chief of the Armed Forces of Nigeria, President Muhammadu Buhari, GCFR and the leadership of the two chambers of the National Assembly pleading that government should suspend the implementation of the excise duties on non-alcoholic, carbonated and sugary drinks.
The Congress provided a number of very cogent reasons why the government should not go ahead with the decision to impose fresh taxes on soft drinks. One of the reasons we advanced was that the re-introduction of excise duties on non-alcoholic, carbonated and sugary drinks will impose immense hardship on ordinary Nigerians who easily keep hunger at bay with a bottle of soft drink and maybe a loaf of bread.
Our concern is the mass hunger that would result from the slightest increase in the retail price of soft drinks owing to the imposition of excise duties as it would be priced beyond the reach of many Nigerians. Congress was also alerted by the complaint of manufacturers of soft drinks in Nigeria that the re-introduction of excise duties would lead to a 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.
Nigerians would recall that this was also the complaint of tyre manufacturing companies such as Dunlop and Michelin which was overlooked by the government until the two companies relocated to neighboring Ghana. A similar situation is playing out with the soft drinks manufacturing sub-sector. Government should pay attention.
With 38% of the entire manufacturing output in Nigeria and 22.5% 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.
There is thus no gainsaying the fact that the industry is a golden goose that must be kept alive. The health reason proffered by the government as a reason for the reintroduction of the excise duties seems altruistic. Yet, we are amiss why the government did not place the excise duties on sugar itself as a commodity rather than on carbonated drinks.
The truth of the matter is that an additional increase in the retail price of carbonated drinks would put more Nigerians at risk of serious health challenges as many people would resort to consuming sub-standard and unhygienic drinks as substitutes for carbonated drinks.
The appeal to rescind the re-introduction of excise duties on non-alcoholic drinks becomes even more compelling when the projected immediate revenue expected from the policy is weighed against the potential long-term loss to both manufacturers and the government. The beverage sub-sector will lose 40% 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 reintroduction of the excise duties. The government also stands to lose N197 billion in VAT, Company Income Tax and Tertiary Education Tax as a consequence of the expected downturn in overall industry performance should the excise duties be effected as being planned.
In light of the foregoing, we ask the National Assembly to quickly amend the sections of the Finance Act that re-introduced excise duties on non-alcoholic and carbonated drinks. We also ask the government to extend COVID-19 palliatives and support incentives to the Food and Beverages industry to cushion the shock and hemorrhage that the industry is trying to recover from.
Finally, we demand that Government should engage Employers in the subsector and Organized Labour in sincere discussions on other options that can deliver a mutually satisfying win-win solution to this issue. We hope that the current situation will not be allowed to degenerate into a breakdown in industrial relations in the sector and generally in the country.
Comrade Ayuba Wabba, mni
Nigeria and Indonesia Boost Trade Balance by 80.77% in 2022, Unveiling New Economic Opportunities
The figures show an impressive increase of 80.77%, with the trade balance soaring from $2.6 billion in the prior year to a substantial $4.7 billion in 2022.
The Nigerian-Indonesia Chamber of Commerce and Industry has announced a remarkable surge in the trade balance between Nigeria and Indonesia. The figures show an impressive increase of 80.77%, with the trade balance soaring from $2.6 billion in the prior year to a substantial $4.7 billion in 2022.
This revelation was made by Ishmael Balogun, President of the chamber, during the prestigious 2023 Equipment and Manufacturing West Africa Exhibition, held under the theme “Reigniting Manufacturing to Drive Economic Growth and Development” in Lagos.
During the event, industry experts unanimously underscored the pivotal role of technology adoption, human capacity building, and collaboration in revitalizing the manufacturing sector to foster economic growth and development in Nigeria.
In his address, Balogun shed light on the significance of bilateral trade and investment, technological advancements, and global engagement. He emphasized that embracing technology and forging international partnerships would enable businesses to venture into uncharted territories and unlock mutually beneficial opportunities.
Balogun stated, “It is with great pleasure that I inform you about the tremendous growth in the trade balance between Nigeria and Indonesia, which has surged from $2.6 billion in 2021 to $4.7 billion in 2022. Our objective is to continually explore new horizons and expand our outreach further.”
Tumi Adeyemi, Founder and CEO of ZenoLynk Technologies Limited, expressed his views on the matter, emphasizing the critical role of a robust manufacturing base in ensuring self-sufficiency, reducing import dependency, and stimulating exports, thereby bolstering the country’s trade balance.
He highlighted the persistent challenges faced by Nigeria’s manufacturing industry, including inadequate infrastructure, unreliable power supply, limited access to finance, bureaucratic bottlenecks, and inconsistent policies.
According to Adeyemi, leveraging technology is essential to overcoming these obstacles and unlocking growth opportunities for the Nigerian manufacturing sector.
He also pointed out the tremendous potential of the African Continental Free Trade Area agreement, describing it as a golden opportunity for Nigeria’s manufacturing industry. By capitalizing on this vast market of 1.3 billion people and eliminating trade barriers, Nigerian manufacturers can expand their reach, tap into new markets, and boost export-oriented production.
To position Nigeria’s manufacturing sector as a regional powerhouse, Adeyemi called for strategic planning, increased competitiveness, and product diversification. By embracing these measures, the industry can harness its full potential and establish a thriving manufacturing sector that maximizes value addition and reduces dependence on imports.
Abubakar Aliu, the former Director of Industry Trade and Investment, stressed the transformative impact of the African Continental Free Trade Area agreement on promoting industrialization in Africa. He highlighted the immense opportunities it presents for expanding manufacturing capabilities and driving economic growth across the continent.
With the exponential growth in the trade balance between Nigeria and Indonesia, coupled with the commitment of industry experts and stakeholders to embrace technology, enhance competitiveness, and foster collaboration, the future of Nigeria’s manufacturing sector appears brighter than ever. By harnessing the power of technology and strategic planning, Nigeria can position itself as a force to be reckoned with in the global manufacturing landscape, while also contributing significantly to Africa’s industrialization agenda.
Nigeria’s Economy Grows at Slower Pace in Q1 2023 as Cash Crunch Weighs on Productivity
The Nigerian economy grew at a 2.31% pace in real terms in the first quarter (Q1) 2023, according to the latest report from the National Bureau of Statistics (NBS). This represents a 0.8% year-on-year decline when compared to the 3.11% recorded in the first quarter of 2022.
The bureau attributed the decline to the impact of cash crunch experienced across the nation during the quarter under review.
However, growth was driven mainly by the Services sector, which recorded a growth of 4.35% and contributed 57.29% to the aggregate Gross Domestic Product (GDP).
The agriculture sector contracted by -0.90%, below the 3.16% growth recorded in the first quarter of 2022. Although the growth of the industry sector improved to 0.31% relative to – 6.81% recorded in the first quarter of 2022, agriculture, and the industry sectors contributed less to the aggregate GDP in the quarter under review compared to the first quarter of 2022.
In the first quarter, aggregate GDP stood at N51,242,151.21 million in nominal terms, higher when compared to the first quarter of 2022 which recorded aggregate GDP of N45,317,823.33 million, indicating a year-on-year nominal growth of 13.07%.
The Nigerian Oil Sector
Nigeria was pumping crude oil at 1.51 million barrels per day (mbpd) in the first quarter, higher than the 1.49mbpd recorded in the first quarter of 2022 and 0.17mbpd higher than 1.34mbpd pumped in the fourth quarter of 2022.
The sector contracted by 4.21% (year-on-year) in Q1 2023, indicating an increase of 21.83% points relative to the -26.04% recorded in the corresponding quarter of 2022 while growth in the sector rose by 9.18% points when compared to –13.38% filled in the final quarter of 2022. On a quarterly basis, the oil sector recorded a growth rate of 20.68% in Q1 2023.
The sector contributed 6.21% to the total real GDP in the quarter under review, down from 6.63% and 4.34% recorded in the first quarter of 2022 and up from the preceding quarter respectively.
The Nigerian Non-Oil Sector
According to the report, the non-oil sector expanded by 2.77% in real terms in Q1 2023. Representing a decline of 3.30% from the same quarter of 2022 and 1.67% points lower than the final quarter of 2022.
The non-oil sector was driven in the first quarter of 2023 mainly by Information and Communication (Telecommunication); Financial and Insurance (Financial Institutions); Trade; Manufacturing (Food, Beverage & Tobacco); Construction; and Transportation & Storage (Road Transport), accounting for positive GDP growth.
In real terms, the non-oil sector contributed 93.79% to the nation’s GDP in the first quarter of 2023, higher than the share recorded in the first quarter of 2022 which was 93.37% and lower than the fourth quarter of 2022 recorded as
German Economy Plunges Into Recession as Household Spending Succumbed to Inflationary Pressure
Europe’s largest economy, Germany has plunged into recession as inflationary pressure eroded consumer spending and household income.
The economy contracted by 0.3% in the first quarter of the year following a 0.5% decline recorded in the final quarter of 2022. An economy is said to be in recession if it contracted for two successive quarters.
German economic GDP data showed “surprisingly negative signals,” said Finance Minister Christian Lindner on Thursday. Comparing Germany with other developed economies, the minister said the economy was losing potential for growth.
“I don’t want Germany to play in a league in which we have to relegate ourselves to the last positions,” he said, referring to the forecasts of the International Monetary Fund, which predicted a recession in 2023 only in Germany and Britain among European countries.
However, Robert Habeck, Germany’s economy minister, had attributed the slowdown in growth to the previous exposure to Russia’s energy supply and the decision to cut supply following the breakout of war in Ukraine.
“We’re fighting our way out of this crisis,” Habeck said at an event in Berlin on Thursday.
“Under the weight of immense inflation, the German consumer has fallen to his knees, dragging the entire economy down with him,” said Andreas Scheuerle, an analyst at DekaBank.
Data revealed by Investors King showed German household consumption declined by 1.2% quarter on quarter after price, seasonal and calendar adjustments. While government spending also contracted substantially by 4.9% in the quarter.
“The warm winter weather, a rebound in industrial activity, helped by the Chinese reopening, and an easing of supply chain frictions were not enough to get the economy out of the recessionary danger zone,” ING global head of macro Carsten Brzeski said.
By contrast, investment was up in the first three months of the year, following a weak second half of 2022. Investment in machinery and equipment increased by 3.2% compared with the previous quarter, while investment in construction went up 3.9% on quarter.
There were also positive contributions from trade. Exports rose 0.4%, while imports fell 0.9%.
“The massive rise in energy prices took its toll in the winter half-year,” Commerzbank chief economist Joerg Kraemer said.
A recession could not be avoided and now the question is whether there will be any recovery in the second half of the year.
“Looking beyond the first quarter, the optimism at the start of the year seems to have given way to more of a sense of reality,” Brzeski said.
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