The Manufacturers Association of Nigeria (MAN) says it fears the imminent closure of some cigarette and alcohol manufacturing companies in the country if government eventually follows through its recently announced increment in excise duties on cigarettes and alcohol beverages. Frank Jacobs, MAN’s president, told business a.m. in an interview that the body will be planning to meet with the government this week over the issue to express members’ concerns.
“The fear we have is not of people being laid off but of companies shutting down as the products they produce will never be competitive when compared with their imported counterparts. That is why we are taking it to the government that if they go ahead to implement it, some companies might be out of business,’” he said.
MAN believes that under the current harsh economic environment in which manufacturers operate, the government should first think of making it conducive before embarking on any increment of any form of taxation, including excise duties.
Kemi Adeosun, Nigeria’s minister of finance, announced the plan of government to raise excise duty on alcoholic beverages and tobacco, with effect from June 4, 2018. Adeosun stated that the new excise duty rates were spread over a three-year period from 2018 to 2020 in order to moderate the impact on prices of the affected products and under the newly approved excise duty rates for tobacco, in addition to the 20 percent ad-valorem rate, each stick of cigarette will attract a N1 (N20 per pack of 20 sticks) in 2018, N2 specific rate per stick (N40 per pack of 20 sticks) in 2019 and N2.90k specific rate per stick (N58 per pack of 20 sticks) in 2020.
The new specific excise duty rates for alcoholic beverages cut across beer and stout, wines and spirits for the three years 2018 to 2020.
Under the new regime, beer and stout would attract N0.30k per centiliter (Cl) in 2018 and N0.35k per Cl each in 2019 and 2020. Wines would attract N1.25k per Cl in 2018 and N1.50k per Cl each in 2019 and 2020, while N1.50k per Cl was approved for Spirits in 2018, N1.75k per Cl in 2019 and N2.00k per Cl in 2020.
But Jacobs said: “The bottom line of my members and the cost of their products are of concern to us. We are currently taking it up with the government to see what can be done so it won’t be too severe on the manufacturing firms and my advice to government is that this is not the time to increase excise duty because of the harsh environment under which manufacturers operate, lack of infrastructure, power, funds, lack of railway to move our goods. This is not the time and until some of these challenges are taken care of, this is not the time to increase excise duties”.
He said the meeting will be this week as it wants to discuss with its members before the body communicates with the government through the letter.
Freddy Messanvi, British American Tobacco West Africa legal and external affairs director, in a recent interview on the activities of the tobacco regulatory body in Nigeria said: “Though the regulatory environment is conducive for our industry, there is, however, a need to continually drive for a balance in the way it is implemented and communicated to key stakeholders such as consumers, enforcers, agencies and the general public.
Kufre Ekanem, corporate affairs manager for Nigerian Breweries promised to call back as he was in an engagement when reached to comment on the recent increase.
Some other manufacturers commented on the issue of anonymity as they said their ecosystem is fragile and don’t want to be seen as opposing the government.
They said the timing was wrong as most of them are just recovering from a negative profitability and revenue contraction as ideally, a countercyclical policy direction that would ensure injections into the system would have been more appropriate and taxes are withdrawals, hence the increase in excise duty is likely to reduce margins and could prompt higher unemployment.
Industry operators cautioned government to think the increment twice as he noted that apart from the implications earlier mentioned, the move by the government will encourage the patronage of the informal tobacco and alcohol producers and operations of this unregulated industry are poised to be more detrimental to health and have been known to incite public nuisance and abuse.