Nigerians thumb down planned tax on carbonated beverages

…Consider impact on citizens – Adefolarin

…Levies’ll further hike prices of goods – Businessman

…It’ll provoke industrial crisis, lead to job loss – NLC, LCCI

 …It’s not silver bullet, MAN declares

…FG needs to rebuild trust – Expert

As Nigerians were yet to properly digest the news by the minister of Finance, Budget and National Planning, Zainab Ahmed, on the petrol subsidy, she threw another bombshell – the government will place taxes on carbonated drinks. In this report, BENJAMIN UMUTEME looks at the pros and cons of the proposed policy.  

In August when the National Assembly declared that they would amend the Finance Act, following the argument by the Comptroller General of the Nigerian Customs Service (NCS), Hameed Ali, that all beverage companies should be made to pay levies, not many gave it a thought. On that fateful day, Ali explained that non-alcoholic drinks were as harmful as alcoholic beverages, noting that there is a 30 per cent excise levy on alcoholic drinks.

 “I have sung this song for many years now, Coca-Cola is produced in this country and it is not being taxed. There is nowhere in the world that Coca-Cola is not paying tax to its host country, but Coca-Cola in this country is not paying anything because of the government’s unwillingness to re-excise those companies. For us, we have been battling for it, and I hope that one day, we will start collecting,” he said.

Fast forward to January, 2022 and it is obvious the Customs boss has finally won.

At the public presentation of the 2022 Appropriation Act in Abuja, the finance minister disclosed that the federal government had introduced an excise duty of N10 per litre on all non-alcoholic, carbonated and sweetened beverages.

Excise duty is a form of tax imposed on the production, licensing and sale of goods. According to her, the new policy introduced is in the Finance Act signed into law by President Muhammadu Buhari on December 31, 2021.

She said the purpose of the additional tax was to discourage the consumption of excessive sugar among Nigerians, which, according to her, contributes to diabetes and obesity.

The minister further said the new measure was in line with the 2022 Budget priorities which enabled the government to introduce a new sugar tax to raise revenue for health-related and other critical expenditures. About four million Nigerians suffer from diabetes linked to excess sugar consumption.

Nigeria ranks the 4th highest soft drink consuming country globally, with over 40 million litres sold yearly.

She said, “There’s now an excise duty of N10 per litre imposed on all non-alcoholic and sweetened beverages. And this is to discourage excessive consumption of sugar in beverages which contributes to a number of health conditions including diabetes and obesity.  But it is also used to raise excise duties and revenues for health-related and other critical expenditures.  This is in line also with the 2022 budget priorities.”


The minister had barely left the venue of the event when Nigerians started reacting to the government’s move to implement a new tax regime. For many, the government was insensitive considering the difficult state Nigerians and businesses were in. For various business concerns, another tax would only increase the crushing burden they have been operating under for so long. 

The impact many say is potential job loss and further increase in the prices of carbonated drinks many Nigerians lament is already on the high side.


As Nigerians were condemning the government’s pronouncement, many more were excited about the decision. Reacting to the news, in an email to Blueprint, a non-governmental organisation, the Amaka Chiwuike-Uba Foundation (ACUF), described the introduction of a N10 per liter excise duty on soft drinks as “a welcome development and legislation that has been long awaited.”

According to the ACUF Board chair, Dr. Chiwuike Uba, the partial introduction of Sin Tax will not only lead to a drastic decline in the consumption of potentially harmful goods (especially Sugar Sweetened Beverages (SSBs) ), but an increase in the government revenue as well as improvements in the population health.

“According to Statista, in 2019, Nigeria was the seventh largest country with the highest consumption of soft drinks in the world, with more than 49 servings of eight ounces per capita per year. By the way, the market is projected to grow by 17.12% per year between 2021 and 2026.

“Many studies have found that the recent rapid increase in early-onset colorectal cancer in adolescence and adulthood are largely attributed to the consumption of soft drinks. Consumption of two or more of these drinks per day exposes the consumer to double the risk of colorectal cancer and other cancers before the age of 50 years. In 2020, there were more than 124,815 new cancer cases in Nigeria, including more than 78,899 related deaths,” Dr. Uba said.

He said further that, “According to the International Diabetes Federation (IDF), treating diabetes per person has gone from an average cost of N60, 000 in 2011 to N300, 000 in 2021. This figure is also expected to exceed N500, 000 in 2030 and N1.0 million in 2045.

“In the same vein, the financial burden of diabetic foot problem in terms of direct costs of treatment is above N2 million. The government must make every effort to deter the high consumption of these sugary and products harmful to health.

“According to IDF, diabetes-related healthcare expenditures in Nigeria in 2021 were about N745 billion. This will increase to more than N1.07 trillion by 2030 and N1.59 trillion by 2045. The average treatment cost for a cancer patient is N30 million.”

Nigerians’ angst

Despite the grim figures churned out by ACUF, analysts opine that the issue is more than raising tax to increase revenue.

Speaking with this reporter, a political economist and development researcher, Adefolarin Olamilekan, said the government has to answer the critical question of whether the government’s revenue challenge is a fiscal issue or leakage issue.

Olamilekan said until the government addresses that question, it would continue to further burden businesses and Nigerians with new taxes. “Until appropriate and concrete answers are provided, the Nigerian state would have no other business than to impose unfriendly taxes on the people and businesses,” he said.

While acknowledging that the government’s position for the tax on carbonated drinks is justified, the political economist urged fiscal authorities to carefully weigh the impact it would have on the economy before implementation.

“In this case, the N10-litre tax on carbonated drinks even though it has its justification in terms of curtailing the negative effect of carbonated drinks on the personal health and wellbeing of citizens, the consequence of this type of tax on the economy should be weighed before being implemented.”

The news of the policy did not go down well with Silas Njoku who manages a provision shop in Jikwoyi in the Federal Capital Territory (FCT).

According to him, the news of another tax to the ones he is already paying is not funny at all. He lamented to this reporter that the rise in the prices of goods was already affecting his sales/profit.

“I am yet to find a way of balancing between keeping my customers and selling goods to them at a price that I will be able to make profit and now this new tax on coke and others. How do they want us to survive? Is the government only interested in themselves without thinking of other Nigerians,” he asked this reporter rhetorically.

For PR expert and lead consultant, Leap Communications, Muyiwa Akintunde, businesses would be forced to absolve the additional costs, but it would ultimately affect their other commitments.

According to him, business owners themselves will say that considering all the projects they engage in, in their CSR programs – they fix roads, construct bore-holes for communities and the like after which they still pay taxes, will this decision not further stretch them?

“For me, the whole thing is like putting the cart before the horse. Paying taxes is good, however people want to know that their taxes count and that the government is actually using the resources from taxes to their collective advantage and when we have that, it will be easy for people to respond to tax payment without being forced to it.

Labour, others protest

In a swift reaction, the Nigeria Labour Congress (NLC) rejected the policy, warning that the move could precipitate an industrial crisis in the sector.

According to the NLC, Nigeria cannot afford what led to the relocation of two tyre manufacturing firms, Dunlop and Michelin to Ghana following a similar complaint of harsh policy.

A statement by its president, Ayuba Wabba, read in part, “Congress was also alerted by the complaint of manufacturers of soft drinks in Nigeria that the re-introduction of excise duties on their products would lead to very sharp decline in sales, forced reduction in production, and a sure rollback in investments with the certainty of job losses and possibly shutdown of their manufacturing plants.”

The Lagos Chamber of Commerce and Industry (LCCI) also kicked, arguing that the newly-imposed excise duty on carbonated drinks would have a ripple effect on the prices and demand of the commodity, resulting in the loss of jobs due to reduced production activities.

Its director-general, Chinyere Almona, noted that the policy “exposes domestic producers of carbonated drinks to unfair competition.”

“The federal government has announced it will charge an excise levy of N10 per litre on all non-alcoholic carbonated sweetened beverages to discourage excessive sugar consumption and boost revenue.

“The immediate concerns are the likely increase in prices which may lead to a decrease in demand and, consequently, loss of jobs due to a reduction in production activities.

“The prohibition on imported drinks should be better enforced to protect domestic production from unfair competition in the face of the high cost of production in Nigeria,” she said.

MAN’s take

The Manufacturers Association of Nigeria (MAN) in its reaction, stressed it would make Nigeria to lose investments to other countries.

MAN’s director-general, Segun Ajayi-Kadir, in a statement said despite the debilitating impact of naira devaluation, inadequacy of forex and the Covid-19 pandemic, the affected sub-sectors contributed significantly to the economy and taxes.

According to him, Nigeria is the sixth-highest consumer of soft drinks, but per capita consumption is low.

“It would appear that the goose that lays the golden eggs is being led to perdition. The food and beverage subsector contributed the highest (38 per cent) of the total manufacturing sector to the GDP. It comprises 22.5 per cent of manufacturing jobs and generates more than 1.5 million jobs. So, this levy would certainly cast a sunset to this performance,” he said.

According to him, recent studies have shown that introducing excise on non-alcoholic beverages is likely to cause a 0.43 per cent contraction in output and about 40 per cent drop in total industry revenues in the next five years.

Ajayi-Kadir said the policy would lead to high production costs which would adversely affect production levels and ultimately result in dwindling profits.

“Introducing excise will easily reduce production capacity causing manufacturers to struggle to meet investor commitments as well as cause investors to take investments to other countries.”

NLC’s interest

However, some Nigerians do not share the NLC sentiment, saying Labour was more about protecting their interest.

For a Jikwoyi resident who would not want his name in print, everything that the government wants to do is greeted with disapproval.

He said: “Nigerians and reject. The government cannot raise fuel prices even when babies in gestations can tell prices are going up around the world. The government can’t raise taxes. Nigerians run over bloated civil services yet can’t trim it because of fear of civil unrests, etc. No one wants to make a sacrifice yet you all are expecting the best from your govt. You all want a good life. How in hell is that even gonna happen?

Another said: “This NLC is in the dark; when will they learn to pick their fight? Maybe they are defending some companies.”

No cause for alarm

Experts say there is no cause for alarm, noting that it would not affect the retail price of carbonated drinks as the cost can be easily absolved by the big-time manufacturers.

Davey Ugwuadu, an accountant and tax expert, said the implication of the policy ought to be more on the manufacturers. According to him, the big-time manufacturers should be able to absorb the extra cost without tampering with the retail price of their products because doing that may boomerang.

“Note that the products we are talking about here are highly elastic in demand; it is not something we cannot do without. The manufacturers will look at the middle ground to see what they can do to maintain their sales volume. This is what profit is all about.

“For me, I expect the big players like Nigerian Bottling Company and 7up Bottling Company to absolve the cost and not bother to tamper with their retail price. We know that the government is looking for money, hence the new excise duty.

“Without a doubt, the new policy is an additional pain for the manufacturers, the question is what the government will gain from the additional cost, will the consumer gain them, and will the money reflect in governance? Or will the extra revenue go the usual way where money raised from taxes go?”

Re-building trust

For Olamilekan, the government needs to address the trust deficit that currently exists between it and the citizens. According to the political economist, there is huge gap of mistrust in the country which cuts across the three tiers of the government.

“Secondly, the Nigerian state must communicate effectively with the people on its policy direction. Over the years lack of sound top-bottom communication in indigenous language is the bane of citizens supporting government policy. That is why most government policy is regarded as anti people and pro elite policy.

“Thirdly, a reduction from N10 to N3 would be suitable and effective. Lastly, the government and labour must see reasons to dialogue on this especially as the foods and beverages workers may be at lost if business owners tend to act otherwise.”