Higher SSB Tax may raise prices – Report warns

n n

By Chidinma Chukwu, ABUJA

n

A new report by ThinkBusiness Africa has warned that the proposed increase in Nigeria’s excise duty on sugar-sweetened beverages (SSBs) could significantly raise prices of soft drinks, while its impact on obesity, diabetes and hypertension remains uncertain.

n

The report examined the proposed amendment to the Customs, Excise Tariff, Etc. (Consolidation) Act (CETA), which seeks to replace the existing N10-per-litre excise duty with an ad valorem tax.

n

According to the report, the proposed system could raise the effective tax burden to about N130 per litre based on prevailing beverage prices.

n

It said the change would make taxation dependent on the value of beverages rather than the volume produced, potentially increasing prices and placing additional administrative pressure on manufacturers.

n

Citing modelling by the Centre for the Study of the Economies of Africa (CSEA), as referenced in a submission by the Manufacturers Association of Nigeria, ThinkBusiness Africa said a N130-per-litre tax could result in a 39 per cent increase in retail prices and a 29 per cent reduction in annual per capita consumption of SSBs.

n

It also projected that annual industry output could decline from N1.5 trillion to N1.1 trillion by 2030, while the production index could fall from 78 to about 40.

n

The report, however, stressed that the figures were modelled scenarios and did not represent observed outcomes.

n

On the public health implications, ThinkBusiness Africa acknowledged evidence that taxes on SSBs could reduce purchases of taxed beverages, but said evidence was less conclusive on whether such reductions would translate into lower rates of obesity, diabetes and hypertension.

n

“Chronic diseases are influenced by several factors, including overall diet, physical activity, income, education and access to healthcare,” the report said.

n

It also questioned the proposed use of beverage value as the basis for the tax, arguing that a levy directly linked to sugar content could better achieve the health objective.

n

The report cited South Africa and the United Kingdom, where sugar-related taxes are linked to sugar content or specified thresholds, saying such systems could encourage manufacturers to reformulate products and reduce sugar levels.

n

ThinkBusiness Africa said more than 133 million Nigerians were living in multidimensional poverty, with households already facing weak purchasing power and rising living costs.

n

“For many households, the immediate effect of a higher SSB tax will be straightforward: higher prices.

n

“For manufacturers, distributors and retailers, the consequences may include higher costs, weaker demand and pressure on production. This matters because the beverage sector is not an isolated industry. It is connected to agriculture, sugar supply, packaging, logistics, transportation, wholesale and retail,” it said.

n

The report also cited data from the National Sugar Development Council showing that total sugar consumption fell from about 1.72 million tonnes in 2022 to 1.44 million tonnes in 2023, while domestic production dropped from 46,479 tonnes to 30,053 tonnes.

n

Although the declines could not be attributed solely to the existing SSB tax, the report said they reflected a difficult operating environment characterised by inflation, exchange-rate pressures, rising input costs and weaker consumer demand.

n

It further warned that a higher tax would not necessarily guarantee increased or sustainable government revenue, as reduced consumption, lower formal-sector production and a shift to informal markets could shrink the taxable base.

n

ThinkBusiness Africa therefore called for a comprehensive assessment of the proposed tax, greater transparency on revenue generated from the existing N10-per-litre levy and consideration of a sugar-content-based tax.

n

It also recommended stronger non-tax measures, including public health campaigns, promotion of physical activity, early screening for diabetes and hypertension, and improved primary healthcare.

n

The report said Nigeria needed stronger measures to tackle diabetes, obesity and hypertension, but cautioned that a substantially higher SSB tax should not automatically be equated with an effective public health policy.

n n