Manufacturers Association Urges Govt Not To Increase Excise Duty On Alcoholic Beverages, Tobacco

The Manufacturers Association of Nigeria (MAN) president, Francis Meshioye, urged the Nigerian government to rescind the 2023 Fiscal Policy Measures (FPMs), considering the increase in excise rates on alcoholic beverages and tobacco.

Meshioye held a press conference on Tuesday to discuss, "Increase in Excise Rates for Alcoholic Beverages and Tobacco, as contained in the 2023 FPMs dated 20th April 2023," which was attended by several companies' managing directors and heads.

Meshioye pointed out that the exponential increase in excise duty is a shocker as the tobacco industry has been already taxed five times more than usual, compared to other industries. Moreover, the excise rates on beer products are also 200% comparatively.

He noted that this is "an increase on an increase," which is "exceptionally excessive and not consistent with best practice globally," ThisDayLive reported.

Meshioye explained that this new increase "is coming against the backdrop of the huge tax burden on the tobacco and beverage sectors, with the tobacco industry being taxed five times more than the average for other industries."

The MAN president went on to explain that these increased excise rates are coming at a time when the "manufacturing sector is immersed in an unprecedented crisis and an acute recession, due to extraordinary challenges."

Meshioyenamed the challenges, sharing the "sustained scarcity of naira (which has led to a crash in consumer purchases); limited access to foreign exchange (which has led the industry to purchase foreign exchange from the parallel market, thereby increasing costs); record inflation (which further drive-up cost of operation and prices of products) and a struggling economy."

He noted that these extraordinary challenges have resulted in a massive decline of -169% in profit before tax for the brewing sector in Q1 2023. Moreover, the industry turnover for non-alcoholic beverages and tobacco has declined by -15%.

Gross profit and profit before tax declined by -31% and -96% within the same period, as per Meshioye's statement. He also shared that the Nigerian manufacturing sector has a 36% downturn in profit margins from 2021 to 2022.

Whereas, the energy cost has increased by 400%, which is eventually constraining the sector's growth.

"In addition, the tobacco sector has actively begun to reduce its export production from Nigeria as it has over N39 billion trapped in Export Expansion Grant (EEG) incentive not yet released to it by the federal government to manage its operations," he said. "Thus, this is not the time to impose additional increases in excise."

Managing Director Nigeria and Area Director West & Central Africa at British American Tobacco Nigeria (BATCO), Yarub Al-Bahrani, attended the press conference alongside Chairman of Nigeria Breweries, Asue Ighodalo, Managing Director/CEO of Nigeria Breweries Plc, Hans Essaadi, Chief Executive Officer of Guinness Nigeria, John Musunga and Non-Executive Director of International Breweries, Michael Onochie Ajukwu.

Nigeria is also going through a major economic crisis since demonetization as it caused an estimated loss of N20 trillion to the country.