There are indications that the implementation of the federal governments sugar tax which was passed into law in the 2021 Finance A...
There are indications that the implementation of the federal governments sugar tax which was passed into law in the 2021 Finance Act by President Muhammadu Buhari on December 31, 2021, has started. A market survey by Legit.ng shows that a 50cl PET Coke, Pepsi, Sprite and others hitherto sold for N150 are now sold between N230 to N250, while a 33cl malt drink is sold for between N250 and N350 by retail marketers. Apart from the over 33 per cent increase in the prices of those products, the retail market survey also shows a spiked inflow of 35cl drinks from Rite Foods and Coca-Cola brands sold for N100 as cheaper choices for consumers.
Recall that in a desperate move to increase revenue, the federal government passed the 2021 Finance Act. The Act introduced a Sugar-Sweetened Beverage (SSB) tax, which imposed a ₦10 excise duty on every litre of all non-alcoholic and sugar sweetened carbonated drinks. This was followed by an announcement in January 2022, by the Federal government through the minister of Finance announced that it will start the collection of the N10 per litre excise duty on all non-alcoholic, carbonated and sweetened beverages. The current hike in the prices of these products is a fulfilment of the provisions of the Finance Act 2021 which empowered the federal government to collect such excise duties to generate revenue, curb the excessive consumption of sugars and tackle the growing obesity and diabetes menace in the country. The implementation of the policy supports the stand of the National Action on Sugar Reduction (NASR), who believe it is needed if the Nigerian government is to tackle diabetes and obesity.
However, different stakeholders have argued against this policy. On signing the policy, the National Union of Food, Beverage and Tobacco Employees (NUFBTE), the Manufacturers Association of Nigeria (MAN) and the Nigeria Employers’ Consultative Association (NECA) condemned the tax. They opine that the levy will increase the cost of production, reduce the production lines and force manufacturers to close down factories and lay off workers. They warned that the sugar policy will be counterproductive and therefore asked the government to suspend its implementation.
Despite this warning, the government has gone ahead to implement the policy, and this is impacting negatively on manufacturers’ cost of production. The manufacturers have therefore transferred this levy to the consumers as noticed in the over 33 percent rise in the cost of the products. This is piling unnecessary pressure on both consumers and manufacturers. Many retailer shops are now contemplating closing shops given the drastic reduction in the rates of sale of this product. With the reduction in sales, and its likely impact on production, the government may not achieve its revenue reason.
Many of the beverage companies have started resizing their PET bottles, this is the right step to take. This will ensure that consumers who are loyal to the products still find affordable sizes they can be able to purchase in the midst of the current increasing prices of the products coupled with the high inflation that is further depleting the size of the purchasing power of consumers. Coca-Cola still stands a better chance of remaining in the market given its presence in all the states and regions of the country. It is also important that this price increases should be done in phases such that the consumers will not feel at a swoop the heavy burden of the levy on them.
One of the new policies introduced in the 2022 Finance Act signed into law by President Muhammadu Buhari on December 31, 2021, is ...
One of the new policies introduced in the 2022 Finance Act signed into law by President Muhammadu Buhari on December 31, 2021, is the N10/litre excise duty on all nonalcoholic, carbonated, and sweetened beverages. Government said it aims to discourage excessive consumption of sugar in beverages, with the intention to reduce the incidences of obesity and diabetes in the country. This new “sugar tax” will also raise revenues for health related and critical expenditures.
The process to the imposition of this levy started in the third quarter of 2021 at the interactive session on the 2022-2024 Medium-Term Expenditure Framework (MTEF), when the members of the National Assembly resolved to amend the Finance Act to include levies on all carbonated and non-carbonated drinks. At the forum, the Comptroller-General of the Nigerian Customs Services, Hameed Ali, submitted that all companies, producing alcoholic and non-alcoholic beverages should be subjected to levies as their products are injurious to health. Since the negative health implication is the reason why government is levying alcoholic drinks producers, it is therefore also necessary that the carbonated drinks production with similar health consequences should be taxed, he asserted.
The government has signed into law the 2022 Appropriation Act, signaling its resolve to start levying the excise duties as contained in the Act. The law stipulates that for every litre of carbonated drink produced and consumed in the country, a N10 excise duty is expected to be paid into the government coffers by the producer. Among the companies that will be subjected to this levy are, Coca-Cola Nigerian, 7Up Bottling Company, Rite Foods, La Casera Company, Fayrouz, produced by Nigerian Breweries, and other producers of carbonated drinks in Nigeria. With the commencement of the implementation, the argument has shifted to who bears the burden of the N10/litre levy.
There are various reasons why government imposes taxes. Apart from raising revenue, taxes (sales) are used to discourage the consumption of a supposed harmful product. According to the government, excessive consumption of sugar through any means is one of the reasons why so many Nigerians are infected with diabetes and obesity. Thus, the imposition of this N10/litre on all nonalcoholic, carbonated, and sweetened beverages produced with sugar is therefore it’s way of discouraging the consumption of these products.
Taxation of any kind comes with consequences, referred to as incidences or burdens which affects the distribution of welfare of one or more economic agents. The magnitude of this effect, however, depends on the elasticity of demand of such products, i.e., the degree of responsiveness of consumers to a change in the price of the commodity, in this case, the carbonated drinks. The excise levy on carbonated drinks will no doubt seek to raise the prices of these products. This is the more reason why the burden of the levy will be borne by the consumers of such products. In other words, the demand for the product will remain inelastic, the increase in the price of the products will not have much effect on the consumption of the product even though it will be borne by mostly the consumers. There may be impacts on the company, though.
Increases in taxes everywhere reduces the disposable income of consumers. Where there is no corresponding increase in the disposable income of consumers, the quantity of such products bought and consumed must as a matter of fact reduce. This is where the producers must worry about. Despite inflation, Nigerian authorities have concluded plans to fully deregulate the petroleum sector in July 2022, which has the tendency to shoot prices of commodities to the roof top without a corresponding appreciation in consumer income. Any increase in the price of carbonated drinks, in the era of deregulation and its consequences, will eventually reduce the quantity sold by the producerss in the carbonated drink sector of the FMCG, and ultimately their profitability. This justifies the statement that the existence of a tax often reduces the extent of market transactions.
The companies should leverage the Coca-Cola Company model of how to tackle problems associated with increases in taxes meant to dissuade consumption of their products
- The companies increase the sizes and prices of other less sugar products. This increase in sizes which may come with a little price addition may attract consumers to these products thereby helping the company to recoup its losses using this market. The use of these methods is important for consumers who believe in the company’s original taste and quality, devoid of sugar.
- As an old company, another way the company can increase its market share in this tax regime period is by not passing the entire excise levy on to consumers. The company should absorb part of the levy while the consumers will bear the rest. Through this way, the price increase resulting from this will be so minimal such that it will attract more consumers from other competitors whose prices will be fully shifted to consumers.
NB: Labour and the Organised Private Sector (OPS) are currently engaging government to see what can be done to protect the producers. While the discourse is ongoing, it is important that the Coca-Cola Nigeria Limited devises one of the above means or others at its disposal to sustain its market leadership position in the industry.
The Standard Organisation of Nigeria (SON) has approved new standards (energy meters, solar photovoltaic (PV) panels, inverters, b...
The Standard Organisation of Nigeria (SON) has approved new standards (energy meters, solar photovoltaic (PV) panels, inverters, batteries, and charge controllers) for renewable energy. This is part of the federal government’s efforts towards actualizing the economic diversification agenda in the renewable energy subsector across the country, to standardise the solar power industry to substantially increase its share in the global energy mix, in line with the United Nation’s Sustainable Development Goals (SDGs). The aim of which is to attract more investments in the sector as well as increase access to power supply across the country and reduce the use of expensive and ecologically harmful diesel generators.
The SON is deploying a multi-stakeholder approach with consultations and inputs from relevant public-private entities to develop a more regulated and standardised market, which will encourage further investments into Renewable Energy (RE) and Efficient Energy (EE) sector. The agency is supported by the Nigerian Energy Support Programme (NESP), a technical assistance programme co-funded by the European Union and the German Government and implemented by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH in collaboration with the Federal Ministry of Power.
The organisation noted that due to its flexibility and affordability, solar power has fast become the most popular form of renewable power.
The NESP is aimed at improving the framework conditions for investments in the application of renewable energy and energy efficiency and rural electrification. This will provide guidance towards the achievement of the objectives of the strategy set for the implementation of renewable energy policy, that will foster investments in the domestic market for Renewable Energy (RE) and Energy Efficiency (EE) and improving access to electricity in Nigeria.
Though flexible, the solar power is also affordable. It relies heavily on standardization. Standards play an essential part in testing, energy conversion, reflectance or materials properties, fabricating arrays, integrating into the smart grid and assuring workplace safety. About 37 standards were selected and approved in November 2020 under this subsector. This depicts the increasing relevance of the renewable energy. The solar power has fast become the most popular form of renewable power.
35 New ISO Standards for the Oil and Gas Industry Underway
The SON is also set to unveil about 35 new ISO standards for the nation’s oil and gas industry. This is important given the role the oil and gas sector play in Nigeria. This makes important that Nigeria key into the global trends to remain competitive at the international market.
The SON has set up Technical Committee (TC) meeting for the adoption of 35 ISO Standards for Nigerian use. The meeting is meant to capture details on standard requirements for metal corrosion inhibition, enhance regulation, certification, and speedy service delivery in the sector. This TC meeting will also help to harmonise practices in various sectors of the economy. The ISO standard will add a lot of value to the Nigerian Oil and Gas Industry thereby generating revenue for the economy.
The 35 standards adopted include, ISO 3233-1 2019 part 1-3 paints and varnishes Determination of percentage volume of non-volatile matter, IS0 19097-1 2018 part 1 -2 Accelerated Life Test method of Mixed Metal Oxide Anode for Catholic Protection, ISO 13847: 2013 Petroleum and natural gas industries- pipelines transportation systems to name but a few.
In the early months of 2020, the COVID-19 which started in China and spread to few countries in 2019, caused most nations to impos...
In the early months of 2020, the COVID-19 which started in China and spread to few countries in 2019, caused most nations to impose serious restrictive measures in and into their countries. Non-essential businesses, schools, markets and even hospitals became no go arears as travel bans were imposed by many countries. This led to serious hunger, forcing many countries, including capitalist-oriented ones to resort to socialist policies as a way of ameliorating the excruciating pains passed through by its citizens.
As the restrictions and social distancing continued, it became obvious that many nations were becoming poorer by day. Nigeria for instance could no longer find buyers for its crude oil, the most important means of raising foreign revenue and exchange for investment, the country was plunged into its second recession in the life time of this administration, the worst since the birth of Nigeria. The recession was caused by many factors. The manufacturers could not import inputs and other intermediate products; thus, production was stalled. Second, workers were barred from office. Even if there were inputs for production, workers were not available to direct such processes. Third, while most workers were asked to stay at home with reduced or no salary, many were completely laid off and as such no monthly stipend for survival. This reduced the disposable income as well as the purchasing power of consumers, and as such affected the profitability of firms, many of which have not survived those harsh periods till now. The opportunity cost of this action was an increased poverty in the country.
Many nations around the world have eased down the restrictions or lockdowns, not because COVID-19 has been eradicated or the vaccine found, but to bring an end to the ensuing hunger that is ravaging their population. Apart from the fact that the original variant of the disease from China is still present, different variants have also developed. The latest being the “Omicrom variant”, said to be detected first in South Africa. The Omicron variant is of concern because it has a large number of mutations, some of which have been associated with potential increased transmissibility and possible immune escape, this means that there are chances people may get infected by it even if they have developed some natural immunity from previous COVID-19 infection, or following COVID-19 vaccination. Another issue about this variant is that its mutation has not been properly investigated and documented, hence, there is no proper health to guide actions against it.
In the light of the above, the omicron variant of the COVID-19 has generated a lot of fears among many nations. More than 50 nations, including the US, Canada, the UK, etc., have imposed stricter border controls as the variant is identified in 24 countries. So far, Canada, South Arabia, Tanzania have blocked flights in and out of their countries, the UK has announced a one moth restriction, Spain announced a state of emergency with a possibility of extension, France, Germany and Italy have also followed suit with new restrictions. These countries are undaunted by their actions despite WHO’s warning of likely worsening inequalities. The question now is, what will the consequences of this looming global restrictions, especially for countries like Nigeria, given the harsh experience of 2020?
Although the country has maintained a positive growth in GDP in the last four quarters since it exited the last recession in December 2020, the drop in the third quarter of 2021 real GDP growth to 4.03% from 5.01% in the second quarter could be worsened by this imminent global restriction and lockdown aimed at curtailing the spread of the omicron variant of COVID-19. This will lead to the resurgence of the economic woes of 2020 which led to the losses of means of livelihoods and closure of businesses. While the manufacturing sector will be amongst the worst hit, the telecoms sector will again be the mostly patronized sector as most businesses will device to virtual transactions.
The federal government has also announced its resolve to fully deregulate the downstream sector of the petroleum industry in 2022 in line with the Petroleum Industry Act of 2021. As said in the Nigerian parlance, deregulation, especially in the period of global restriction will “add pepper to salt” or worsen the already tensed situation of the average consumer who is facing a southward drop in the disposable income due to the increasing cost of living. Many industries will likely go moribund, given the low sales and the increasing production cost. It is therefore difficult to suggest that the outcome of deregulation in the period of global restriction against omicron variant of COVID-19 will be positive.
- One of the easiest ways to avert one of the problems (inability to import inputs) during the 2020 lock down and global restriction is to begin to source for inputs locally.
- Upgrade of infrastructures is also important because the restriction may cause more people, organisation and institutions to adopt virtual meetings for their daily activities. This will increase the traffic on the telecoms infrastructure. This is the season of more revenue for the firms under the industry.
- In anticipation of the surge in the demand for internet and call services, adequate training should be given to telecoms staff as a way of preparing them for the period.