Nigeria’s Minister of Finance, Mrs. Kemi Adeosun, on Sunday, announced a presidential approval on the amendment to the excise duty rates for alcoholic beverages and tobacco in the country with effect from today.
According to The Nations, Adeosun disclosed that the new duty rates were spread over a three-year period from this year to 2020 to moderate the impact on prices of the products.
She noted that the new excise duty rate on tobacco is now a combination of the ad-valorem base rate and specific rate, while the ad-valorem rate was replaced with a specific rate for alcoholic beverages.
Adeosun further noted that the new regime was the outcome of an all-inclusive stakeholders meeting by the Tariff Technical Committee (TTC) of the Federal Ministry of Finance with key industry stakeholders.
In her words:
“The Tariff Technical Committee (TCC) recommended the slight adjustment in the excise duty charges after cautious considerations of the Government’s Fiscal Policy Measures for 2018 and the reports of the World Bank and the International Monetary Fund Technical Assistance Mission on Nigeria’s Fiscal Policy.”
Recall that the Federal Government had on March 11th proposed to amend the excise tariff rates for alcoholic and tobacco products in the country with effect from today.
Figures from the National Bureau of Statistics (NBS) reveal Nigeria’s beverage and tobacco imports were ₦64.9 billion in 2017 up from ₦49 billion in 2016. Nigeria’s tobacco export was ₦8.9 billion in the 4th quarter of 2017 alone.
According to the new taxes, a stick of cigarette will attract a ₦1 specific rate per stick (₦20 per pack of 20 sticks) in 2018, a ₦2 specific rate per stick (₦40 per pack of 20 sticks) in 2019 and ₦2.90k specific rate per stick (₦58 per pack of 20 sticks) in 2020.
Also, beer and stout would attract ₦0.30k per centilitre (Cl) in 2018 and ₦0.35k per Cl each in 2019 and 2020. Wines would attract ₦1.25k per Cl in 2018 and ₦1.50k per Cl each in 2019 and 2020, while ₦1.50k per Cl was approved for Spirits in 2018, ₦1.75k per Cl in 2019 and ₦2.00k per Cl in 2020.
Tough times for manufacturers
While the government may make revenue running into billions from enforcing the law, in the immediate and medium term it will lead to a fall in the demand for tobacco products. This, in turn, leads to reduced revenue for the firms. The drop in demand and revenue may lead to laying off workers and taxes paid by the companies will also reduce.
However, some players in the alcohol industry are already making arrangement to cushion the effect of the new law albeit taking advantage of the opportunity it presents.
Jordi Borrut Bel, Managing Director of Nigerian Breweries’ Plc, recently revealed plans by the company to increase its local content capacity, especially its sorghum value chain to boost its production capacity.