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Soft drinks sector collapse imminent, MAN raises alarm

THE Manufacturers Association of Nigeria (MAN) have raised the alarm over the Federal Government’s proposed 20 per cent ad-valorem excise tax on non-alcoholic beverages, which covers the Carbonated Soft Drinks (CSD) segment.

    Rising from a meeting held in Lagos, the carbonated soft drinks sub-sector of the association, posited that 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.

The group called for the suspension of the proposed excise tax by the Federal government to forestall the collapse of the industry.

Director, Corporate Affairs and Sustainability, Nigerian Bottling Company (NBC), Ekuma Eze, who at the meeting argued that the sub-sector, which accounts for 33 per cent of the entire manufacturing sector in Nigeria, said with the N10 per litre excise, tax effect between June and August 2022, increase had already caused the sector an eight per cent revenue decline for the Federal Government as a direct result of excise tax implementation. 

  According to the sectorial group heads, the decision if not reviewed may lead to further revenue decline, thereby bringing it to hit 25 per cent by year end, excluding the cost of write-offs of products produced, excised but not sold.

 The group argued further that with the proposed 20 per cent tax introduction, the collapse of the soft drink market was imminent, stressing that the effect will be catastrophic as thousands of jobs will be affected and the ultimate aim of the government in collecting revenue will be completely defeated.

 “The devastating effect of the N10 per litre tax 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.

 “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 on Value Added Tax (VAT) and N207 billion in Company Income Tax (CIT), an 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,” the group said. 

 “According to the Nigeria Bureau of Statistics (NBS), the food and beverage division of the economy in the last five years generated 1.5 million jobs, both direct and indirect. 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 is deteriorating as the companies are finding it difficult to carry out their operations effectively,” it added.

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