Nigerian manufacturing companies called on the government to halt a tax on sweetened beverages that’s due to come into effect this month, saying it’s unlikely to generate the desired income and could cause some businesses to collapse.
The excise levy of 10 naira ($0.02) per liter on all non-alcoholic carbonated sweetened beverages was announced by Finance Minister Zainab Ahmed earlier this week as part of measures to discourage excessive sugar consumption and boost revenue.
The tax take as a proportion of gross domestic product in Africa’s largest economy is one of the lowest globally, according to the International Monetary Fund. President Muhammadu Buhari’s administration collected 8.26-trillion naira ($19.9-billion) in taxes in 2020. That compares with South Africa’s $85.3-billion.
Ahmed has previously said that Nigeria’s lack of revenue is the country’s main fiscal challenge.
“The revenue aspirations of government in introducing this excise may not be justified in the long run,” Segun Ajayi-Kadir, director-general of the Manufacturers Association of Nigeria, said in an emailed statement. It will raise “production costs, which in turn adversely affect production levels and intimately result in dwindling profits,” he said.
The income raised will be insufficient to compensate for other revenue losses should industries collapse, Ajayi-Kadir said.