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Collapse of soft drinks sector looms, MAN warns

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The carbonated soft drinks sub-sector of the Manufacturers Association of Nigeria (MAN) has raised the alarm over the Federal Government’s proposed 20 per cent excise tax on non-alcoholic beverages which covers the widely consumed Carbonated Soft Drinks (CSD) segment.

Rising from a meeting in Lagos, last week, the sectoral group said such a move will spell doom for the sector as the effect of the prevailing N10 per litre tax regime was already crippling the sector with its biting effects on their businesses.

According to them, industry study already indicated the impacts of the prevailing N10 per litre excise tax effect between June and August 2022 showed eight per cent revenue decline as a direct result of excise tax implementation.

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The study also projected that the decline will hit –25 per cent by December 2023 if not reviewed. “This excludes the cost of write-offs of products produced, excised but not sold,” the sectoral group said, warning, “With the proposed 20 per cent Ad-valorem tax introduction, the collapse of the soft drink market is imminent.”

The sectoral group also said the collapse will be catastrophic as thousands of jobs will be affected and the ultimate aim of the government in collecting revenue will be completely defeated.

“Most certainly, the additional 20 per cent will not only kill the sector but result in the loss of revenue by the Federal Government, and a consequential phenomenal loss of jobs by various layers of the Nigerian workforce,” it added
The Soft Drinks Manufacturers Sub-sector of MAN accounts for 33 per cent of the entire manufacturing sector in Nigeria.

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Interestingly, the manufacturing industry contributes 15 per cent to the Gross Domestic Product (GDP) of the Nigerian economy, while the food and beverage sector contributes five per cent, with a payment of N202 billion to the government in Value Added Tax (VAT), and N207 billion in Company Income Tax (CIT).

The sectoral group warned that the enormous amount that would be lost by the Federal Government if the sector is allowed to collapse will have a multiplier effect on infrastructural development and growth of the already troubled economy.

According to the National Bureau of Statistics (NBS), the food and beverage division of the economy, in the last five years, generated 1.5 million direct and indirect jobs, and it was from 2020 to date that some companies in the sector strived to pay minimum tax, which is a pointer to the fact that the business climate was deteriorating, as the companies are finding it difficult to carry out their operations effectively.

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“There is evidence that the current N10 per litre excise tax on non-alcoholic beverages is ravaging the sector as the companies pay N10 for every litre of beverage produced, whether or not sold,” the group reiterated.

They decried the devastating effects of the N10 per litre tax, which, according to them, has become burdensome with the high cost of operation in the country and its constituent elements.

“This is already having devastating effects on the end cost to consumers, considering their poor economic condition; an additional 20 per cent will most certainly kill the sector,” the group averred.

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They, therefore, called for the suspension of the catastrophic excise tax being proposed by the Federal Government to forestall the collapse of the industry.

Corroborating this position, the Corporate Affairs and Sustainability Director, Nigerian Bottling Company (NBC), Ekuma Eze, pointed out that the N10 per litre excise duty currently in practice has no bearing on profitability for any of the members of the sectoral group.

He stated that since the introduction of the N10 per litre excise tax, businesses in the sector have been experiencing a worrisome decline.

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