Following the decision by the Federal Government to halt the proposed in- crease in excise duty on alcoholic, non-alcoholic beverages, Nigerian Breweries Plc has said further excise increases, including significant ones that are being rumored at this point in time, would have a devastating effect on its business as well as the performance of the 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. The move may have a dual benefit of raising the govern- ment’s fiscal revenues but would affect the companies in- come and out put at large. This was even as the com- pany noted that it would seek shareholders’ approval for an intercompany loan of €110 million from Heineken International at its forthcoming annual general meeting (AGM). Its Managing Director, Hans Essaadi, disclosed this to news- men in Lagos recently. Whilst noting that the fundamentals of the Nigerian market is very positive with the benefit of an enabling environment, Essaadi noted that the nation’s macro- economic indicators, security and infrastructure continued 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 rumoured 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 what- ever 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 in- creases 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.”
According to him, the com- pany’s performance in the first quarter (Q1) of 2023 has been extremely difficult due to the current FX shortages. He, thereafter, said NB Plc would continue to focus on maintaining its leadership sta- tus in the market and will lever- age its history, footprint, brand portfolio and people to drive a responsive pricing strategy and prioritize cost and value. Also speaking at the event, the Finance Director at NB Plc, Ben Wessels Boer, said that FX losses had a major impact on the company’s profitability in 2022 while adding that it would settle its long overdue payables to IBECOR, Heineken Interna- tional via a €110 million loan and would need shareholders’ approval for the loan. “We expect that if it is ap- proved, we can get the loan in May 2023 and basically we will use that and indeed it is enough to pay the over-dues to our buy- ing agent and all the full denom- inated debts. “We also have some debt which is not foreign denominat- ed which includes dividends to Heineken and also royalties. We are not using this debt to repay those, but it is for the foreign de- nominated debt that we will pay and also for machinery because that part of course is critical for our business continuity,” Boer said.