Stakeholders in the beverages sector have applauded the federal government’s decision of not increasing taxes on sugar-sweetened beverages (SSBs), describing the move as a lifeline for a sector facing numerous challenges.
The decision was hailed as having the potential to reignite manufacturing growth and protect jobs.
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The Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, revealed the government’s plans to stabilize the economy on Wednesday when the National Action on Sugar Reduction (NASR), a coalition of non-governmental organisations, visited him in Abuja.
According to the Minister, the decision is part of a broader strategy aimed at stimulating economic growth, supporting local industries, and ultimately alleviating the financial pressures on manufacturers in the country.
In his announcement, the Minister emphasised the government’s commitment to creating a conducive environment for businesses to thrive, noting that the measure will help beverage companies navigate the current economic difficulties without going under.
The call for increasing the taxes on SSB has been a contentious issue, with stakeholders across the country arguing that it disproportionately affects both producers and consumers. A discriminatory tax on sugar sweetened beverages negatively impacts businesses and the jobs they create.
These taxes not only harm the business environment but also its upstream suppliers and downstream distributors and retailers – and, ultimately, does not raise the desired revenues for the government.
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They raised concerns regarding the proposed review of the tax policy, citing that it will adversely affect the sector’s growth and sustainability.
They pointed out that the sector had consistently been making losses, although its tax burden had continued to rise.
In four of the last six years, the SSB industry has endured significant losses, yet continued to shoulder increasing tax burdens.
Remarkably, in 2021 and 2022, the industry’s total tax contributions soared to 4-8 times their profit after tax, underscoring the immense financial strain on this struggling sector.
The full-year performance of many of the companies operating in the sector tells the story of the harsh realities, with many of them including Nigerian Breweries, International Breweries and Guinness Nigeria Plc recording huge losses. It will be recalled that Guinness Nigeria, recently joined the growing list of foreign companies to exit the Nigerian market.
The company agreed to sell 58.02 per cent of its shareholding to Singapore-based Tolaram Group.
While proponents of SSB taxes base their call for an increase on the supposed health gains, stakeholders have continued to argue that Nigeria does not have a sugar problem. They contend that with an 8.3 kg per capita consumption of sugar, Nigeria consumes less sugar than the WHO prescribed threshold of 9.1 kg per capita and is, in fact, one of the lowest in Africa. Other practitioners have also pointed out that the real worry should be the consequence of burdening an already struggling sector. They believe the aftermath of such a measure will only lead to more problems including outright closures and job losses.
Beyond the economic issues, there are also concerns about the stress and health impact that may accompany the fear of losing one’s means of livelihood—something that can lead to overall mental and emotional health issues, and significantly increase the occurrence of cardiovascular events in the country.
Undoubtedly, the beverage industry is vital to Nigeria’s manufacturing sector, contributing significantly to employment and economic activity. The government’s decision to delay the increase in taxes for SSB is expected to bolster the sector’s resilience and drive further investments, ultimately benefiting the Nigerian economy.
