New Telegraph

Beverage: Examining FG’s Flip-Flop On Excise Duty Hike

Following the decision of the Federal Government to halt proposed increase in excise duty on alcoholic, nonalcoholic beverages, the Manufacturers Association of Nigeria (MAN) had insisted that a further excise tax increase in June 2023 would have a devastating effect on the country’s beverage sector of theeconomy. Taiwo Hassan reports

Indeed, it has been tough for the country’s beverage and brewery industries since the Federal Government started targeting the sector, by sporadically jerking up its excise duties in an attempt to shore up revenue, amidst profound macro-economic challenges, infrastructure and insecurity.

No doubt, the real sector of the economy has always been at the receiving end of government’s policies, be it fiscal and monetary, despite the macroeconomic containments bedeviling the economy.

Anytime the Federal Government is looking for an avenue to rake more money to shore up it’s revenue profile in the country, it’s still this same real sector of the economy always the scapegoat that government thinks first.

Ironically, the same government has been preaching and glorifying itself to the moon that it’s committed to creating business enabling environment for Micro Small and Medium scale Enterprises (MSMEs) as well as admitting that huge amount had been spent to support sustainable business growth in Nigeria.

Ideally, all is a fluke and lies as investigation reveals that firms doing businesses in Nigeria have been finding it difficult to operate smoothly and efficiently because of sundry challenges posed by government’s policies, including difficulties in accessing to finance, good operating environment, harsh regulatory framework, inadequate power supply and many others.

2018-2020 Excise duty rate To buttress government’s insensitivity to the plights of manufacturers, in 2018, a former Minister of Finance, Budget and National Planning, Ms. Kemi Adeosun, unexpectedly announced that government was introducing a 3- year (2018-2020) excise duty on alcoholic beverages, spirits and tobacco for manufacturers in this category in order to help government shore up its revenue aftermath of a plunge in crude oil price at the international market.

Indeed, the implementation took-off in June 4, 2018 when many of them were unprepared of the impending headwinds. Under the then approved excise duty rates for tobacco, in addition to the 20 per cent advalorem rate, each stick of cigarette attracted N1 (N20 per pack of 20 sticks) in 2018, N2 specific rate per stick (N40 per pack of 20 sticks) in 2019 and N2.90k specific rate per stick (N58 per pack of 20 sticks) in 2020.

That of excise duty rates for alcoholic beverages cuts across beer & stout, wines and spirits for the three years between 2018 and 2020. Under the regime, beer & stout attracted N0.30k per centiliter (Cl) in 2018 and N0.35k per Cl each in 2019 and 2020. Wines attracted N1.25k per Cl in 2018 and N1.50k per Cl each in 2019 and 2020, while N1.50k per Cl was approved for spirits in 2018, N1.75k per Cl in 2019 and N2.00k per Cl in 2020.

Since that time, it has never been a roll coaster for players in the beverage and brewery sectors. Setbacks However, a major setback that plagued the productive sector in 2022 was the introduction of an excise duty of N10 per litre on all non-alcoholic, carbonated and sweetened beverages in the country.

The charge was part of a new policy introduced in the Finance Act, which was signed into law by President Muhammadu Buhari on December 31, 2021, alongside the 2022 Appropriation Bill. According to the Minister of Finance, Budget and National Planning, Hajiya Zainab Ahmed, the new sugar tax was introduced to raise excise duties and revenues for health-related and other critical expenditures in line with the 2022 budget priorities.

Although the projected revenue was put at N81 billion from 2021-2025, the potential loss to government in other forms of taxes and revenue cut leaves much to be desired. The Manufacturers Association of Nigeria through series of advocacy channels warned that a new tax imposed on carbonated drinks and others would be counterproductive and that government should devise other means of generating revenue rather than inadvertently stifling the productive sector which is already struggling.

Still grappling with a recent increase in line with a three-year roadmap, the proposed increase in excise on beer, wines and spirits, tobacco and non-alcoholic brverages in 2023 became another nightmare to a sector gasping for survival amidst evident setbacks occasioned by naira scarcity, forex crunch, and infrastructure deficit among others.

Halts Indeed, recently, MAN broke the news to the world that government had put a halt to the take-off of the much anticipated controversial increase in excise duty on beer, wines and spirits, tobacco and non-alcoholic beverage slated for June 2023 for the wellbeing and growth of the country’s manufacturing sector.

According to MAN, government stated that it would now allow the excise regime to run its full course from 2022 to 2024 as programmed in the roadmap by the Federal Government in 2022. Ahmed dropped the hint when a delegation of the Manufacturers Association of Nigeria (MAN) led by its President, Otunba Francis Meshioye, paid her a courtesy visit in Abuja recently, to further register their concerns on the much anticipated controversial proposed excise duty.

Disclosing this to New Telegraph in Lagos, the Director-General of MAN, Mr. Segun Ajayi-Kadir, said that Hajiya Ahmed had given her reassurance to MAN that when the 2023 Fiscal Policy Guidelines and the reconsideration of the Finance Act 2023 are released to the public, the guidelines would not include the proposed increase in excise duty on beer, wines and spirits, tobacco and non-alcoholic beverage in 2023, but rather allow the excise regime to run its full course from 2022 to 2024 as programmed in the road map by the Federal Government in 2022.

The MAN DG said that the Finance Minister reassured the MAN delegation of Government’s commitment to the wellbeing of the manufacturing sector and the concerned sector in this instance. According to him, government’s moves to scrap the excise duty this year comes as a huge relief to local manufacturers across the federation and will signpost the administration’s support for the sustenance of manufacturing in Nigeria on this score.

Reasons for visit MAN justified that the palpable apprehension in the concerned sector necessitated another courtesy visit and presentation to the Minister of Finance, Budget and National Planning by a delegation of the Manufacturers Association of Nigeria. The delegation was led by the President, Otunba Francis Meshioye and the outcomes allayed the fears of MAN. The Minister reassured the delegation of government’s commitment to the wellbeing of the manufacturing sector and the concerned sector in this instance.

“The Association is gladdened by the assurances of the Minister, Hajiya Zainab Ahmed that the 2023 Fiscal Policy Guidelines and the reconsideration of the Finance Act 2023 have been concluded and would be released immediately. “In specific terms, she assured that the guidelines would not include the proposed increase in Excise duty on Beer, Wines and Spirits, Tobacco and Non-Alcoholic Beverage in 2023, but rather allow the excise regime to run its full course from 2022 to 2024 as programmed in the road map by the federal government in 2022.

“This comes as a huge relief to our members across the Federation and will signpost the administration’s support for the sustenance of manufacturing in Nigeria on this score,” MAN DG stated. He added: “As MAN continues to engage with government meaningfully on matters bordering on the nation’s economic prosperity, we look forward to improved performance of the manufacturing sector and the economy.”

NB’s stance Nigerian Breweries Plc, in its definitive stance, said further excise tax increases, including significant ones that are being rumored at this point in time, would have a consequential effect on its business as well as the performance of the country’s brewery sector.

A few weeks ago, President Muhammadu Buhari approved an increase in excise duties on tobacco, alcoholic and beverages, which would take effect from June 4 this year. Its Managing Director, Hans Essaadi, said: “The move may have a dual benefit of raising the government’s fiscal revenues but would affect the companies income and out put at large.”

Essaadi noted that the fundamentals of the Nigerian market was very positive with the benefit of an enabling environment, pointing out that the nation’s macro-economic indicators, security and infrastructure continue to remain at high risk.

He stated that the company believed that it would respectfully pay its duties and taxes in full but noted that the notion of further excise tax increases, including significant ones that are being rumored at this point in time, would have a devastating effect on the company’s business.

Essaadi said: “We believe that especially at this moment in time, this is the wrong thing to do. We are in dialogue with the government but we want to say that this is upon us in whatever way your form and we are trying in dialogue with government to talk sense in wanting to pay fair amounts of tax without overdoing it because ultimately, excise tax increases significantly results to price increases in the market because it is indirectly a text to consumer, leading to higher consumer prices with restricted disposable income which will lead to less revenue, but ultimately will also lead to more poverty in the market.

“We are one of the businesses that are being confronted with this, but just to call this out that it is important for all of you to understand and for us to continue to have this constructive dialogue with the authorities that excise hikes at this point in time is the wrong thing to do.”

Q1’23 performance According to him, the company’s performance in the first quarter (Q1) of 2023 has been extremely difficult due to the current FX shortages. The company’s MD thereafter said NB Plc would continue to focus on maintaining its leadership status in the market and will leverage its history, footprint, brand portfolio and people to drive a responsive pricing strategy and prioritise cost and value.

Also speaking at the event, the Finance Director at NB Plc, Ben Wessels Boer, said that FX loss had a major impact on the company’s profitability in 2022 while adding that it would settle its long overdue payables to IBECOR, Heineken International via a €110 million loan and would need shareholders’ approval for the loan.

Last line From all indication, it is obvious for the players in the beverage and brewery sectors of the economy and other investors that the FG cannot be trusted when it is taking some decions just to pacify business owners.

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