Food, beverage makers bemoan rising taxes, high raw material cost

Players in the food, beverage and tobacco sector have expressed dissatisfaction over rising taxes resulting from multiple charges by government agencies. They also lament that sourcing of foreign exchange from the parallel market has made raw materials more expensive and in turn hiked production costs.

“We have seen in the last few months that many companies source their foreign exchange from the parallel market,” said Paul Gbededo, CEO, Flour Mills of Nigeria plc and newly elected chairman of Food, Beverages and Tobacco Group of the Manufacturers Association of Nigeria, during this year’s annual general meeting (AGM) held in Lagos.

“We know it is higher than what you get at the official market, and if you pay 12 or 13 percent higher for the foreign exchange, you will find it spreading on your cost of production,” Gbededo, who was elected chairman last Wednesday, said.

According to him, the rumoured increase in the Value Added Taxes (VAT) of water producers, if true, would not augur well for the industry which contributes most to food security in the country and substantially to the Gross Domestic Product (GDP).

“We learnt that government is thinking of Pioneer Status. The position of the Federal Inland Revenue Service (FIRS) on paying taxes for two years when your Pioneer Status expires is not good for the industry,” Gbededo said, stressing that there was the need to protect the sector.

He said his leadership would prepare a proposal to the transition committee of the incoming government to present the group’s position and ways of raising the sector from doldrums, saying “we need infrastructure; electricity and transportation, among others, and we need to keep pointing these things out to the government.”

Food, beverage and tobacco companies made N92.67 billion worth of investments in the first half of 2014, according to the latest data from the Manufacturers Association of Nigeria (MAN).

This represents 86 percent increase from N49.95 billion recorded in the second half of 2013.

The sector thus had 19 percent share of the total investments made within the period, with the group’s activities highly driven by the beer, flour mills and the confectionery sub-sectors.

The group had an output value of N83 billion, from N64.4 billion recorded in the corresponding period of 2013 (H1 2013). In terms of local input preference, the sector sourced 62.4 percent of raw materials locally and 33.6 percent from abroad within the period under review. It also contributes most to food security. But a number of challenges beset it.

“Basically, the sector is heavily dependent on energy. Power supply has been erratic and insufficient. Gas is bought with foreign exchange and this makes the price high,” said Michael Daramola, managing director/CEO, International Breweries plc, who handed over the mantle of leadership to Paul Gbededo, last week.

“This is a critical sector that has worked with the government to set quality standards. Processing is a vital part of our food security policy, which we are proposing,” Daramola said.

He commended the Federal Government’s Backward Integration Policy (BIP), which has boosted the growth of the sector, but urged that players in the sector be carried along in decisions affecting them.

He however criticised the National Environmental Standards and Regulations Enforcement Agency’s (NESREA) proposal to make manufacturers solely responsible for implementation of its policy on ‘Extended Producers Responsibility,’ saying government should first of all play its own part.

“Am I the one to take responsibility for a man who drinks a bottle of coke and throws it out of the window?” he asked.

Remi Ogunmefun, in his address, commended the group’s contribution to the manufacturing sector and urged the new leadership to continue with the strides of the last administration.

Fred Chiazo, head, regulatory affairs, Coca-Cola, who was elected first vice-chairman, said government had come up with the Mandatory Food Labelling Policy in the country, stressing that after a meeting with the National Agency for Food and Drug Administration and Control (NAFDAC), the group decided to choose ‘the Fact-based Labelling’ method, rather than ‘Traffic Light’ or ‘Good for You.’

“All food packaging will go with fact-based. Nigeria now wants to put all the nutritional facts on the label,” Chiazo said

The election also produced Kemi Ajasa from Nestle as second vice-chairman; Nureni Obaleye from the Nigerian Bottling Company, as treasurer.

ODINAKA ANUDU