Nigerian soft drink makers say new FG proposal could cripple industry

The soft drinks Manufacturers Association of Nigeria sub-sector [MAN] sounded the alarm over the federal government’s proposed 20% ad valorem excise tax on soft drinks, which covers widely consumed soft drinks [CSD] segment.

At a recent meeting in Lagos, the sector group claimed that such a move would be catastrophic for the sector, as the effect of the prevailing tax regime of N10 per liter was already crippling the sector.

Soft drink makers said revenue fell 8% between June and August 2022, as a direct consequence of the implementation of the excise tax.

They projected the drop to reach 25% by December 2022 if not revised. This excludes the cost of write-offs of products produced, excised but not sold.

Imminent threat: With the proposed introduction of a 20% Ad-valorem tax, the collapse of the soft drink market is imminent. It will be catastrophic as thousands of jobs will be affected and the government’s revenue collection objective will be completely wiped out.

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  • Most certainly, the extra 20% will not only kill the sector but result in loss of revenue for the federal government and a phenomenal loss of jobs by various sections of the Nigerian workforce.“, said the association.

Important sub-sector: According to the association, soft drink manufacturers account for 33% of all manufacturing in Nigeria, contributing about 15% to the Gross domestic product (GDP) of the Nigerian economy.

The manufacturers added that the food and beverage sector contributes about 5% to the country’s tax revenue, with a N202 billion payment to the government on Value Added Tax (VAT) and N207 billion. naira on corporate income tax. This represents a huge sum that the government could lose if the sector is allowed to collapse.

They noted that the food and beverage division of the economy over the past five years has created 1.5 million jobs nationwide, both directly and indirectly, and that is to 2020 to date that some companies in the sector have struggled to pay the minimum tax, which is a sign that the business climate is deteriorating as companies find it difficult to carry out their activities.

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  • “There is evidence that the current excise tax of N10 per liter on soft drinks is wreaking havoc on the industry as companies pay N10 (Ten Naira) for every liter of drink produced whether it is sold or not,” they said.

Consensus : Speaking at the meeting with one voice, the sector heads denounce the devastating effects of the N10 per liter tax, which has become burdensome with the high cost of operations in the country and its constituent parts. This is already having devastating effects on the final cost to consumers, given their poor economic situation; Another 20% will most certainly kill the sector.

They therefore called for the suspension of the excise tax proposed by the federal government to prevent the collapse of the industry.

Confirming this position, Eze StandingGeneral Business and Sustainability Manager, Nigerian Bottling Company (NBC) pointed out that the N10 per liter currently in practice has no bearing on profitability for any of the cluster members.

He said that since the introduction of the N10 per liter excise tax, companies in the sector are experiencing a worrying decline, the average loss in volume and revenue is 10% between June and September 2022, and it is estimated that the decline will continue. worsen to 25% by the end of the year.

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