A new report by ThinkBusiness Africa has warned that the proposed increase in Nigeria’s excise duty on sugar-sweetened beverages (SSBs) could lead to significantly higher prices for soft drinks, while its potential impact on obesity, diabetes and hypertension remains uncertain.
The report examined the proposed amendment to the Customs, Excise Tariff, Etc. (Consolidation) Act (CETA), which seeks to replace the existing N10-per-litre excise duty with an ad valorem tax based on the value of beverages.
According to ThinkBusiness Africa, the proposed system could increase the effective tax burden to about N130 per litre based on prevailing beverage prices.
The report said the change would make the tax dependent on the value of beverages rather than the quantity produced, potentially resulting in higher prices while also creating additional administrative demands for manufacturers.
Citing modelling by the Centre for the Study of the Economies of Africa (CSEA), as referenced in a submission by the Manufacturers Association of Nigeria, the report said a N130-per-litre tax could lead to a 39 per cent increase in retail prices and a 29 per cent decline in annual per capita consumption of SSBs.
It also projected that annual industry output could fall from N1.5 trillion to N1.1 trillion by 2030, while the production index could drop from 78 to about 40.
However, ThinkBusiness Africa stressed that these figures were based on modelled scenarios and should not be interpreted as observed outcomes.
On the health implications of the proposed tax, the report acknowledged evidence that taxes on sugar-sweetened beverages can reduce purchases of taxed products but said it was less certain whether lower consumption would directly result in reduced rates of obesity, diabetes and hypertension.
“Chronic diseases are influenced by several factors, including overall diet, physical activity, income, education and access to healthcare,” the report said.
The report also questioned whether taxing beverages according to their value would be the most effective way to achieve the intended health objective.
It argued that a tax directly linked to sugar content could provide a stronger incentive for manufacturers to reduce the amount of sugar in their products.
ThinkBusiness Africa cited South Africa and the United Kingdom, where sugar-related taxes are linked to sugar content or specific thresholds. According to the report, such systems can encourage manufacturers to reformulate products and reduce sugar levels.
The report noted that more than 133 million Nigerians were living in multidimensional poverty, with households already dealing with weak purchasing power and increasing living costs.
“For many households, the immediate effect of a higher SSB tax will be straightforward: higher prices.
“For manufacturers, distributors and retailers, the consequences may include higher costs, weaker demand and pressure on production. This matters because the beverage sector is not an isolated industry. It is connected to agriculture, sugar supply, packaging, logistics, transportation, wholesale and retail,” it said.
ThinkBusiness Africa also referenced data from the National Sugar Development Council showing that total sugar consumption declined from about 1.72 million tonnes in 2022 to 1.44 million tonnes in 2023, while domestic sugar production fell from 46,479 tonnes to 30,053 tonnes.
The report said the declines could not be attributed solely to the existing SSB tax, noting that the sector had also been affected by inflation, exchange-rate pressures, rising input costs and weaker consumer demand.
It further cautioned that increasing the tax would not automatically guarantee higher or sustainable government revenue. According to the report, reduced consumption, lower formal-sector production and a shift towards informal markets could reduce the taxable base.
ThinkBusiness Africa therefore called for a comprehensive assessment of the proposed tax, greater transparency regarding revenue generated from the existing N10-per-litre levy and consideration of a tax structure based directly on sugar content.
It also recommended strengthening non-tax measures such as public health campaigns, encouraging physical activity, early screening for diabetes and hypertension, and improving primary healthcare.
The report said Nigeria needs stronger measures to address diabetes, obesity and hypertension but cautioned that a substantially higher SSB tax should not automatically be treated as an effective public health policy.
Source: ThinkBusiness Africa
