‘It will cause mass hunger, hardship’ — NLC rejects new tax on carbonated drinks

January 8, 2022
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The Nigeria Labour Congress (NLC) has rejected the federal government’s introduction of N10/litre on all non-alcoholic, carbonated and sweetened beverages.

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Zainab Ahmed, minister of finance, budget and national planning, had announced the new tax on Wednesday.

Ahmed said the new tax would raise revenue for health-related and other critical expenditures.

But in a statement, Ayuba Wabba, president of NLC, wondered why the government did not place the excise duties on sugar itself as a commodity rather than on carbonated drinks, adding that the health reason proffered by the government for the re-introduction of the excise duties “seems altruistic”.

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He said the tax would impose more hardship on the people, especially 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,” Wabba said.

“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.

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“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 neighbouring 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.”

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He said 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 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 government. The beverage sub-sector will lose 40% of its current sales revenue,” he added.

“This translates to a loss of N1.9 trillion. While the government will only make total projected receipts of N81 billion from the proposed re-introduction 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”.

NLC, therefore, asks the national assembly to quickly amend the sections of the Finance Act that re-introduced excise duties on non-alcoholic and carbonated drinks.

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Apart from NLC, several stakeholders, including the Manufacturers Association of Nigeria (MAN) and the Lagos Chamber of Commerce and Industry (LCCI), had faulted the decision, saying the new tax will cause loss of jobs.

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