The Organized Private Sector of Nigeria (OPSN) has sounded the alarm over a proposal by the Federal Ministry of Finance, Budget and National Planning to increase excise duties on tobacco, spirits, alcoholic beverages and non-alcoholic.
The body, which described the increase planned by the ministry’s tariff technical committee as another burden too much, said it was in conflict with fiscal policy measures and the recently established 2022 tariff changes (FPM 2022). which cover 2022-2024.
A PAHO member and Chief Executive of the Nigeria Employers Consultative Association (NECA), Adewale Oyerinde, who condemned the move, said companies are still recovering from challenges that threaten to cripple their production capacity and their contribution to national development.
He said a decision to raise excise duties in an unsustainable way could lead to a significant drop in government revenues for the industry rather than an increase.
“Historically, large increases in excise duties often do not translate into increased revenue in the medium to long term. The more sustainable an excise regime, the better the industry can contribute to the public purse,” a- he declared.
Oyerinde also recalled that recent economic growth in Nigeria has been largely driven by the non-oil sector. He pointed out that subjecting the sector to further hardship does not bode well for the industry’s future or for government revenue growth in 2023 and beyond.
He said the current minimal growth in the economy was an indication that a huge tax hike would not achieve the desired results for all stakeholders. He insisted that the rate of increase of the roadmap of fiscal policy measures and 2022 tariff changes be maintained.
According to him, “If another increase is imposed, the industry will suffer another setback and more consumers may opt for purchases of cheaper products – usually those from the illicit market on which no form of Nigerian tax (including the excise duty) has been paid.”
The NECA boss insisted that while efforts are being made to bring industries back to a sustainable level and boost the employment rate, policies that could undo the weak gains made so far in the economy should be suspended.
He urged that the proposed increase be put on hold and called for maintaining the status quo of no increase in excise duty – other than that prescribed in the 2022 fiscal policy measures approved by the President earlier. within the year (the three-year roadmap that started on June 1, 2022). He further stated that there is a need for the government to further engage the SPO on the matter for an amicable resolution.
While responding to government concerns, Oyerinde noted that ongoing collaboration with regulators to monitor the risk level of soft drinks could be maintained to guard against abuse, while producers could also set out disclaimers as is currently done in the tobacco industry.
