The Federal Government of Nigeria is set to embark on a downward review of the 2018 excise duties imposed on products made by brewing companies in Nigeria.
Basically, the extant tax laws were proposed by the former Minister for finance, Kemi Adesoun, to boost non-oil revenue amid declining income from the oil industry.
It has been argued that incremental rises in these products (alcohol and tobacco) somewhat aligns with global best practices, because most Governments around the world generally tax alcoholic drinks and tobacco for the dual purpose of revenue generation and discouraging the harmful effects of such products.
However, for a recovering economy like Nigeria, keeping factories running and providing jobs are as important as plugging the revenue hole.
Main Alcohol-Beverage companies are struggling for sales
According to the report, the main alcoholic beverage producers in Nigeria which include Anheuser-Busch InBev SA, Heineken BV and Diageo Plc have continued to struggle to improve increase sales due to the contraction witnessed in the economy since 2016.
FG now rethinking earlier policy?
According to the email response to questions received from Paul Abechi, the spoke person for the Finance Minister, Zainab Ahmed, the difficulties witnessed by the alcoholic beverage companies are forcing the government to rethink the taxes earlier imposed.
“Following continued consultation by the government, it has been decided and approved that the excise duties on wines and spirit should be reviewed.
“The process has been set in motion through the relevant departments and inter-ministerial committees and it will soon resolve the matter in a mutually benefiting way.”
About taxes on tobacco and alcoholic drinks
The excise duty for alcoholic beverages and tobacco was approved by President Buhari and took effect on June 4th, 2018. According to the former Minister for Finance, Kemi Adeosun, the excise duty rates were expected to spread over a three- year period from 2018 to 2020 in order to moderate the impact on prices of the product.
The excise duty is a combination of the existing ad-valorem rate, with each stick of cigarette attracting on naira specific rate stick. Earlier, the projection was that by the year 2020, tobacco should attract N2.90 specific rate per stick or N58 pack of 20 sticks.
Similarly, under the regime, beer and stout are to attract 0.30k per centilitre (Cl) in 2018 and 0.35k per Cl each in 2019 and 2020.
Wines are to also attract N1.25k per Cl in 2018 and N1.50k per Cl each in 2019 and 2020, while N1.50k per Cl was approved for spirits in 2018, N1.75k per Cl in 2019 and N2 per Cl in 2020.
Following the upward review of the taxes, the Director-General, Consumer Protection Council (CPC), Babatunde Irukera, reportedly said the decision to increase the excise duty on these commodities was consistent with prevailing global practices.
Also, Akinbode Oluwafemi, the Deputy Executive Director, Environmental Rights Action of Earth Nigeria, described the decision to increase excise duty on tobacco as praise-worthy.
The taxes are hitting hard on brewing companies’ revenue
The increase in brewing products is reportedly having a toll on the industry’s biggest players’ revenues.
For instance, report shows that Heineken’s local unit, Nigerian Breweries Plc, reported 2018 net income that fell 41 percent from the previous year to 19.4 billion naira ($54 million) due to “increased excise duty rates” as well as “a challenging operating environment”.
Also, International Breweries Plc, the local unit of AB InBev, declared a loss of N7bn for the nine months through September, citing rising costs that included taxes. Similarly, Diageo-owned Guinness Nigeria Plc saw its growth blunted by the higher levies.
FG makes U-turn, to embark on a downward review of taxes
The Senate intervention in the excise duty hikes on alcoholic beverages and tobacco products appeared to have finally produced results. The legislature earlier passed a resolution in 2018 calling on the government to suspend the implementation of the new excise rates to give more time to sensitise all stakeholders.
The Senate had suggested increment to no more than 50 per cent, while a larger chunk of the taxes should be shifted on imported alcoholic beverages and tobacco.
According to the Budget and Planning Minister, Udo Udoma,
“The companies don’t need additional tax at a time the economy is coming out of recession and inflation is still high,”
Similarly, the chief executive of Lagos-based Highcap Securities, David Adobri, reportedly said in a phone interview;
“A downward adjustment or abolition of the tax is needed to enable them to remain in business and create jobs.”
COVID-19 Update in Nigeria
On the 6th of March 2021, 195 new confirmed cases and 10 deaths were recorded in Nigeria
The spread of novel Corona Virus Disease (COVID-19) in Nigeria continues to record significant increases as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 158,237 confirmed cases.
On the 6th of March 2021, 195 new confirmed cases and 10 deaths were recorded in Nigeria.
To date, 158,237 cases have been confirmed, 137,645 cases have been discharged and 1,964 deaths have been recorded in 36 states and the Federal Capital Territory.
A total of 1.54 million tests have been carried out as of March 6th, 2021 compared to 1.49 million tests a day earlier.
COVID-19 Case Updates- 6th March 2021,
- Total Number of Cases – 158,237
- Total Number Discharged – 137,645
- Total Deaths – 1,964
- Total Tests Carried out – 1,544,008
According to the NCDC, the 195 new cases are reported from 17 states- Lagos (70), Kaduna (22), Abia (20), Edo (18), Kano (10), Akwa Ibom (9) Rivers (7), FCT (7) Borno (6) Bauchi (5), Osun (5), Oyo (5), Plateau (3), Ekiti (3), Niger (2), Ogun (2) and Zamfara (1).
Meanwhile, the latest numbers bring Lagos state total confirmed cases to 56,374, followed by Abuja (19,328), Plateau (8,939), Kaduna (8,623), Oyo (6,761), Rivers (6,651), Edo (4,645), Ogun (4,419), Kano (3,830), Ondo (3,066), Kwara (2,953), Delta (2,582), Osun (2,449), Nasarawa (2,248), Enugu (2,078), Katsina (2,060), Gombe (2,010), Ebonyi (1,951), Anambra (1,811), Akwa Ibom (1,588), and Abia (1,568).
Imo State has recorded 1,551 cases, Borno (1,297), Bauchi (1,232), Benue (1,188), Adamawa (942), Niger (917), Taraba (863), Ekiti (825), Bayelsa (779), Sokoto (769), Jigawa (496), Kebbi (401), Cross River (334), Yobe (288), Zamfara (221), while Kogi state has recorded 5 cases only.
Lock Down and Curfew
In a move to combat the spread of the pandemic disease, President Muhammadu Buhari directed the cessation of all movements in Lagos and the FCT for an initial period of 14 days, which took effect from 11 pm on Monday, 30th March 2020.
The movement restriction, which was extended by another two weeks period, has been partially put on hold with some businesses commencing operations from May 4. On April 27th, 2020, Nigeria’s President, Muhammadu Buhari declared an overnight curfew from 8 pm to 6 am across the country, as part of new measures to contain the spread of the COVID-19. This comes along with the phased and gradual easing of lockdown measures in FCT, Lagos, and Ogun States, which took effect from Saturday, 2nd May 2020, at 9 am.
On Monday, 29th June 2020 the federal government extended the second phase of the eased lockdown by 4 weeks and approved interstate movement outside curfew hours with effect from July 1, 2020. Also, on Monday 27th July 2020, the federal government extended the second phase of eased lockdown by an additional one week.
On Thursday, 6th August 2020 the federal government through the secretary to the Government of the Federation (SGF) and Chairman of the Presidential Task Force (PTF) on COVID-19 announced the extension of the second phase of eased lockdown by another four (4) weeks.
Governor Babajide Sanwo-Olu of Lagos State announced the closed down of the Eti-Osa Isolation Centre, with effect from Friday, 31st July 2020. He also mentioned that the Agidingbi Isolation Centre would also be closed and the patients relocated to a large capacity centre.
Due to the increased number of covid-19 cases in Nigeria, the Nigerian government ordered the reopening of Isolation and treatment centres in the country on Thursday, 10th December 2020.
On 26th January 2021, the Federal Government announced the extension of the guidelines of phase 3 of the eased lockdown by one month following the rising cases of the coronavirus disease in the country and the expiration of phase 3 of the eased lockdown.
On 28th February 2021, the federal government confirmed that the first tranche of Covid-19 vaccines will arrive in Nigeria on Tuesday, March 2nd, 2021.
CBN tasks multinationals on domestic production as P&G signs $35m deal to produce Oral-B locally
The CBN Governor has called on multinationals operating in the country to work towards the production of their goods in Nigeria.
The Central Bank of Nigeria, as part of its agenda to strengthen the manufacturing sector, has tasked multinational manufacturing companies in the country to consider setting up their manufacturing lines in Nigeria.
Godwin Emefiele, the CBN Governor made this statement during the contract signing ceremony between Procter & Gamble (P&G) and Colori Cosmetics Nigeria in Lagos.
The contract which is a move towards stimulating localization of production was birth from CBN’s policy-driven efforts to encourage improved production of goods that can be produced locally.
The Governor of Nigeria’s apex bank who was the host at the contract signing ceremony encouraged other multinational firms to consider the opportunities that Nigeria offers and begin to set up their manufacturing lines in Nigeria, noting that this move will help in creating jobs and wealth for the growing population.
Emefiele who also spoke on the economic stabilization policies implemented by the CBN to set Nigeria on the path of recovery explained that the manufacturing sector will continue to be a key focus of the efforts by the monetary and fiscal authorities towards driving the recovery of the Nigerian economy.
Why this matters
- The investment deal which is worth $35 million is set to present the well-diversified consumer goods giant with the opportunity to commence the domestic production of Oral-B toothpaste in Nigeria.
- The contract between P&G and Colori Cosmetics Nigeria will facilitate the local production of Oral-B products by P&G in Nigeria, as part of the commitment by the CBN to strengthen the manufacturing sector.
- This move is expected to make Nigeria a competitive producer of the product, and also cut the importation of toothpaste from the US, where P&G is based.
Nairametrics | Company Earnings
Access our Live Feed portal for the latest company earnings as they drop.
- Seplat falls into a loss in FY 2020
- 2020 FY Results: Cornerstone Insurance Plc reports a 61.1% decline in profit
- Ellah Lakes increases operating expenses by 33.36% in HY 2020
- 2020 FY Results: Nigerian Breweries reports a 54.3% decline in profits in 2020
- Abbey Mortgage Bank projects N51.08 million profit in Q2 2020.