‘New excise duties on alcohol will hurt local factories’

Frank Jacobs, president of the Manufacturers Association of Nigeria (MAN), says the new excise duties imposed on alcoholic drinks and tobacco will kill local industries.

Speaking at a press conference last Wednesday, Jacobs said the association was still engaging the government on the duties, but pointed out that factories would suffer great losses if nothing was done to reduce the charges.

“MAN is still engaging the government on that. During the last presidential quarterly business forum, I said that if they go ahead and implement that policy, many of the companies producing these things must close shop. I am not saying ‘will’ but ‘must’,” Jacobs said.

The Federal Government had, on March 11, introduced a new excise duty regime for local wine, alcohol and tobacco.

Under the new regime, in addition to the 20 percent ad-valorem rate (tax based on value), each stick of cigarette will attract N1 and N20 per pack of 20 sticks in 2018. In 2019, the rate will go up to N2 per stick and N40 per pack of 20 sticks. In 2020, N2.90k will be imposed on each stick of cigarette and N58 per pack of 20 sticks.

Nigeria’s cumulative specific excise duty rate for tobacco was 23.2 per cent of the price of the most sold brand, as against 38.14 per cent in Algeria, 36.52 per cent in South Africa and 30 per cent in The Gambia, said Kemi Adeosun, Nigeria’s finance minister.

Similarly, under the new regime, beer and stout will attract N0.30k per centilitre in 2018 and N0.35k per centilitre in 2019 and 2020.

Wines will attract N1.25k per centilitre in 2018 and N1.50k per centilitre in 2019 and 2020. For spirits, N1.50k per centilitre will apply in 2018, N1.75k per centilitre in 2019, and N2.00k per centilitre in 2020.

The government gave a grace period of 90 days to all local manufacturers before the commencement of the new excise duty regime.

Beer makers say the duties will not have significant impact on prices but cigarette and wine makers foresee increases in the near future.

Though this could hurt consumers and firms, governments often impose taxes on products considered to have inelastic demand; that is, products whose demand may not be significantly affected by price changes. Articles or products of habit fall within this category.

ODINAKA ANUDU