The federal government would be earning as much as N240 billion from alcohol consumption and smokers in the next 24 months. This will from the newly imposed N1 tax on each stick of cigarette sold to smokers in Nigeria. The FG estimated that Nigerians smoke an average of 20 billion sticks annually which means that the government will be raking in N20 billion from cigarette taxes in 12 months.
The figure will rise to N40 billion in 2019 when N2 will be imposed on each stick smoked cigarette, if smokers do not cut back on smoking.
Government has also imposed an average of N137.5 on each litre of alcohol (wine and spirits), and with the blenders and distillers producing 600 million litres each year, government will be earning N82.5 billion from alcohol taxes. This means that in the first year, government will be earning N102.5 billion from both cigarette and alcohol taxes.
In the second year (2019), government has imposed an average of N162.5 on a litre of wine and spirit, and with the industry’s 600 million litres per annum production, government stands to make N97.5 billion from alcohol taxes. Add this to N40 billion taxes on cigarettes in the second year, the government will be raking in N137.5 billion from both cigarette and alcohol taxes.
This means that between 2018 and 2019, the government will be raking in N240 billion from taxing smokers and drinkers.
“We are worried that the jobs of over 25,000 Nigerians, plus the connected 250,000 SME staff, are being threatened by this hike,” said Patrick Anegbe, chairman, Distillers and Blenders Group of the Manufacturers Association of Nigeria in Lagos on Wednesday.
“If the implementation of the new duty is allowed to proceed, we are worried about the obvious job losses that will result from low demand of our products,” Anegbe said, adding that it represents over 500 per cent hike purely on local wines and spirits with the exclusion of all imported wines, spirits and champagne.
Kemi Adeosun, Nigeria’s finance minister, had on March 12 approved excise duty rates for tobacco in addition to the 20 per cent ad-valorem rate, with each stick of cigarette attracting N1 specific rate (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 minister explained that Nigeria’s cumulative specific excise duty rate for tobacco was 23.2 per cent of the price of the most sold brand, as against 38.14 per cent in Algeria, 36.52 per cent in South Africa and 30 per cent in The Gambia.
The new specific excise duty rate for alcoholic beverages cuts across beer and stout, wines and spirits for the three years covering 2018 to 2020.
But this has created a lot of controversy by the public as well as affected industries especially the distillers and blenders saying it will hike their production cost and put them out of business. They add that the demand for their products are elastic, as found by KPMG, and cost would not easily be passed onto consumers.
The reason for the proposed hike was to reduce the rate of consumption as the country recorded about 17,500 deaths associated with tobacco and alcohol consumption. Another reason is to generate revenue for the government in order to increase investment which would translate into job opportunities for the citizens.
“We advised the government that this was a wrong time to impose any form of consumption tax. If after recession you are increasing taxes on a commodity consumed by the lower rung of the ladder by over 500 percent, what you are doing is to wipe out the local industry,” said Segun Ajayi-Kadir, director-general of MAN.
ODINAKA ANUDU& OGHOGHO EDOSOMWAN
