FG’s new proposal could cripple industry – MAN

The Manufacturers Association of Nigeria [MAN] has expressed concern about the Federal Government’s proposed 20% Ad-valorem Excise Tax on Non-Alcoholic Beverages, which would apply to the widely consumed carbonated soft drinks segment.

During a recent meeting in Lagos, the sectoral group stated that such a move would spell doom for the sector, as the current N10 per litre tax regime is already crippling the sector.

As a direct result of the excise tax implementation, soft drink manufacturers’ revenue fell by 8% between June and August 2022.

They predicted that if nothing was done, the decline would reach 25% by December 2022. This does not include the cost of write-offs for products manufactured, excised, but not sold.

The proposed 20% Ad-valorem tax will cause the soft drink market to collapse. This will be disastrous because thousands of jobs will be lost, and the government’s goal of collecting revenue will be completely undermined.

“Most certainly the additional 20% will not only kill the sector but result in the loss of revenue by the Federal Government, and a consequential phenomenal loss of jobs by various layers of the Nigerian workforce,” the association said.

The organization estimates that the manufacturing of soft drinks makes up 33% of all manufacturing in Nigeria and accounts for 15% of the country’s Gross Domestic Product (GDP).

The manufacturers also noted that the food and beverage industry pays N202 billion in Value Added Tax (VAT) and N207 billion in Company Income Tax to the government, making up nearly 5% of the country’s total tax collection. If the sector is allowed to fail, the government could lose a staggering amount of money.

They pointed out that the food and beverage sector of the economy produced 1.5 million jobs nationwide in the previous five years, both directly and indirectly. From 2020 until the present, however, some companies in the sector have worked to pay the minimum tax, which is a sign that the business climate is deteriorating as the companies are struggling to carry out their operations effectively.

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“There is evidence that the current N10 per litre excise tax on non-alcoholic beverages is ravaging the sector as the companies pay N10 (Ten Naira) for every litre of beverage produced, whether or not sold,” they said.

The sector chiefs protest the crippling impacts of the N10 per litre tax, which has grown heavy due to the high cost of operation in the country and its component parts, in unison at the conference. Given their dire economic situation, this is already having a disastrous impact on consumers’ final costs; an extra 20% will most definitely kill the industry.

To prevent the industry’s demise, they consequently demanded the suspension of the excise tax that the federal government was considering.

Ekuma Eze, Corporate Affairs and Sustainability Director, Nigerian Bottling Company (NBC), backed up this assertion by pointing out that none of the sectoral group members’ profitability is impacted by the N10 per litre now in use.

According to him, since the N10 per litre Excise Tax was implemented, firms in the sector have seen a concerning fall. Between June and September 2022, volume and revenue losses averaged 10%, and it is predicted that by the end of the year, the decline would rise to 25%.