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’s Inflation Rate Rose in December After 8-month Decline– NBS
The National Bureau of Statistics, on Monday announced that Nigeria’s annual inflation rate has risen to 15.63 percent in December 2021. This was higher than the 15.40 percent recorded in November 2021 when the headline inflation moderated for eight consecutive months. The increase is likely due to the usual surge in the prices of goods and services around Christmas time.
The report stated, “This is showing a slowing down in the rate when compared to the corresponding period of 2020.
“Comparing the rate to the year-on-year performance in the previous months shows that the rate has increased.
“Also, comparing the rate of price change between December and November (month-on-month) shows that the headline index rose by 1.82 per cent in December 2021. The November figure was 1.08 per cent. The rise was in part driven by a continued surge in food inflation.”
According to NBS, the composite food index increased by 17.37 per cent in December 2021 down by 2.19 per cent points compared to the 19.56 per cent obtained in December 2020.
“The average annual rate of change of the Food sub-index for the twelve months ending December 2021 over the previous twelve-month average was 20.40 per cent, 0.22 per cent points lower from the average annual rate of change recorded in November 2021 (20.62) per cent,” it said.
It further mentioned that the rise in the food index was as a result of increases in prices of bread and cereals, food products, meat, fish, potatoes, yam and other tubers, soft drinks and fruits.
The statistics showed that on a month-on-month basis, the food sub-index increased by 2.19 per cent in December 2021, up by 1.12 per cent points from 1.07 per cent obtained in November 2021.
Manufacturing Activities, Macroeconomy Witness Gradual Growth in Q4 2021: MAN
The Manufacturers Association of Nigeria (MAN) has said that Nigeria’s macroeconomy and manufacturing operating environment were buttressed by the marginal recovery of some key manufacturing indicators allowed a gradual improvement in the fourth quarter (Q4) of 2021.
In its Manufacturers CEOs Confidence Index (MCCI) Q4 report, the President of the association, Mr. Mansur Ahmed clarified that although changes in almost all manufacturing indicators as measured in the report are still not as desired, the fourth quarter performance is better than what was obtained in the 2021 Q3.
The MCCI is an index set up by MAN to measure changes in the quarterly pulsation of manufacturing activities in relation to movement in the macroeconomy and government policies. The Index is considered as MAN’s barometer used to aggregate the views of CEOs of manufacturing companies on changes in the economy.
In the report, Ahmed stated that manufacturers’ resilience, seasonal transactions, and passive policy support sustained manufacturing in the quarter despite the prevalence of familiar and emerging excessive tax-related challenges faced by manufacturers.
The manufacturing sector in Q4 of the year under review, overall recorded a mixed grilled performance occasioned by meagre improvement in the operating environment indices and macroeconomic ambiance evidenced by the high points. This he said, cumulatively triggered the increase in the aggregate MCCI score for the quarter to 55.4 points from 54.0 points recording the preceding quarter.
“Manufacturing performance is still below the mark,” Ahmed explained, saying, “notwithstanding the marginal improvement in the operating environment during the quarter under review, as the sector is still plagued by numerous familiar constraints. Some of these challenges enumerated by manufacturers are clearly presented in this report.”
The president further advised the government to implement mechanisms such as providing incentives to encourage investments in raw materials, pharmaceutical and petrochemical materials, iron and steel, etc. He also beckoned on the government to specifically provide security to lives and investments in industrial areas.
“In order to improve the performance of the sector, the government needs to intentionally put in place a mechanism that will address these challenges permanently by considering and implementing the following recommendation:
“Further incentivize investment in the development of raw materials locally through the Backward Integration and Resource-based industrialization initiates. Government should call for more investors to key into these initiatives with appropriate and definite incentives.
“For instance, there is need for urgent investment and production of Active Pharmaceutical Ingredients (API) in the country; investment and production of machines; iron and steel; petrochemical materials, etc to support manufacturing activities.
“Give specific attention to the security of life and investment in industrial areas; properly delineate and upscale security infrastructure in the various industrial areas in the country, particularly in the northern part of the country for priority attention. Government should also quickly invest in modern security such as drones, cameras, etc. for robust monitoring of the areas,” Ahmed stated.
The MAN president in the MCCI report stressed the need to ensure effective allocation of available foreign exchange to productive sectors, especially to the manufacturing sector for the importation of raw materials and vital machines and equipment that are not available locally.
He also buttressed the need for the government to expressly direct the Central Bank of Nigeria (CBN) to consult with the Ministries of Industry Trade & Investment and effectively engage MAN on measures to improve forex supply to manufacturing concerns.
He said that the Ministry of Science Technology and Innovation should be directed to inaugurate the Secretariat that will implement the strategies for the Executive Order and the Standard Organisation of Nigeria (SON). The Secretariat will designate local manufacturers of LPG (Liquefied Petroleum Gas) Gas Cylinders as priority provider of the 10 million Cooking Gas Cylinders to be procured by the government for 12 States in the federation.
Ahmed added, “Return milk and other dairy products to the National list in the fiscal policy guidelines to maintain consistency with the Backward Integration Programme, which has spurred heavy investments in the dairy production.
“Unify academic curriculum with industrial skill needs and requirements to guarantee the sustainable development of skilled manpower for the industries. Government should as a matter of urgency synchronize the curricular of tertiary institutions, particularly the Polytechnics with the skills requirements of industries. The various government vocational and training centers should also be re-engineered to offer those skills that are needed by the industries.
“Revisit the resuscitation of the existing national refineries to produce fuels locally, embark on the rehabilitation of major highway corridors, improve trade facilitation infrastructure and deepen the ongoing development of rails system to change the narrative on the operating environment from being a high cost to low production cost environment.”
On electricity, Ahmed said there is a need to sustain the eligible customer initiative to ensure that more power is supplied to the manufacturing sector.
The Manufacturing Association of Nigeria in its Index Report, further adviced the government to, “Strengthen the Bank of Industry (BOI) and Bank of Agriculture (BOA) to adequately provide liberal finance for the manufacturing sector;
“Monitor the implementation of Executive Order 003 to ensure compliance by MDAs so as to boost activities in the manufacturing sector, Publish the list of approved harmonized taxes and levies for the manufacturing sector by the Joint Tax Board (JTB) to address the issues of multiples taxes and levies.
“Rationalize Government Ministries, Departments, Agencies, parastatal and Commissions to resolve the issues of over-regulation and duplication; Improve the time taken to clear machines and raw-materials at the national ports while making the link road accessible.”
Adoption, Utilisation Of ICT Pivotal To Nigeria’s Socio-economic Development – Danbatta
The Information and Communication Technology (ICT) sector is no doubt, one of the fastest-growing sectors of the country’s GDP and is emerging as its most important long-term growth prospect.
The adoption and utilisation of digital revolutions by the government is creating multiplier effects across critical sectors, aiding job creation, better governance, youth empowerment and overall socio-economic development.
Investors King recalls that the sum of N160.59bn was budgeted for the ministry for the year 2022. This is more than the combined N129.59bn allocated to the ministry from 2016 to 2021.
Indeed, for over 10 years, ICT has consistently contributed more than 10 per cent of the Nigeria’s Gross Domestic Product (GDP) – the telecom sector alone contributed 12.45 per cent to GDP as at the fourth quarter of 2020.
In the second quarter of 2021, the ICT sector contributed 17.92 per cent to the real GDP of the nation.
According to the Executive Vice Chairman (EVC) of the Nigerian Communications Commission (NCC), Prof. Umar Garba Danbatta, in all continents of the world, people, organisations and countries have continued to witness leaps and bounds in economic, social and political activities through the instrumentality of ICT, which has meshed computing, information and communication technology to catalyse development in ways and manners humans never envisaged decades ago.
Danbatta who delivered a paper titled “Empowering the Nigerian Youth though Information and Communication Technology”at the 10th and 11th combined Convocation Lecture of the Fountain University at Osogbo, Osun State recalled the impact of ICT revolution in all parts of human endeavour across countries and continents, insisting that technology will continue to penetrate and foster qualitative and quantifiable changes in all aspects of life.
According to him, Uber, the world’s largest taxi company, owns no vehicle; Airbnb, the world’s largest accommodation provider, owns no real estate; Facebook, world’s most popular public-facing digitally-mediated social networking platform, creates little or no content; Alibaba, a leading global retailer, has little or no inventory, yet they have become signposts of prosperity riding wholly on ICT resources.
These foregoing contextual demonstrations of the possibilities of ICT explain the Federal Government’s policy decisions to strengthen ICT adoption in building a robust digital economy in Nigeria, eloquently expressed in the National Digital Economy Policy and Strategy (NDEPS), 2020-2030; the Nigerian National Broadband Plan (NNBP), 2020-2025 and other series of policies, guidelines and regulations derivative of the NDEPS and NNBP.
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