With effect from today, 4 June 2018, Nigerians will pay more for cigarettes and alcoholic drinks. This was made known after President Muhammdu Buhari approved an amendment to the excise duty rates for alcoholic beverages and tobacco over the weekend. Three months ago, Finance minister Kemi Adeosun announced the introduction of taxes on cigarettes and alcoholic drinks produced in the country for the next three years from 2018 to 2020, beginning in June.
According to the minister of Finance, the increase in the excise duty rates for alcoholic beverages and tobacco was to achieve a dual benefit of raising the Government’s fiscal revenues and reducing the health hazards associated with tobacco-related diseases and alcohol abuse. This will now be a combination of the existing ad-valorem base rate and specific rate while the ad-valorem rate was replaced with a specific rate for alcoholic beverages. The new duty rate for alcoholic beverages also cuts across beer and stout, wines and spirits.
Why the government made this decision
Kemi Adeosun said “the Tariff Technical Committee (TTC) recommended the slight adjustment in the excise duty charges after cautious considerations of the Government’s Fiscal Policy Measures for 2018 and the reports of the World Bank and the International Monetary Fund Technical Assistance Mission on Nigeria’s Fiscal Policy.
“Furthermore, peer country comparisons were also carried out showing Nigeria as being behind the curve in the review of excise duty rates on alcoholic beverages and tobacco.”
Nigeria, a highly religious country, is the highest consumer of alcohol in Africa and one of the world’s top ten markets for alcohol. In the late 2000s, global beer brand Guinness revealed Nigeria as its largest consumer, overtaking even its home market, Ireland. According to the World Health Organization estimates, an average Nigerian consumes about 1228 litres of alcohol per annum.
“The low tax level prevails even though Nigeria is the highest alcohol drinking country in Africa and leads the top 10 largest beer-drinking countries,” the International Monetary Fund said.
The new rates also fall short of the more aggressive recommendations of the World Health Organisation (WHO) in Article 6 of the Framework Convention on Tobacco Control (FCTC), which suggests 70 percent excise on tobacco products.
Heineken NV, which is known as Nigerian Breweries, Guinness Nigeria and the latest entrant into the Nigerian alcoholic beverage market AB InBev are the dominant players in the Nigerian alcohol market. British American Tobacco (BAT) is the market leader for tobacco in Nigeria and controls about 78 percent of the market share.