4 June 2018

Nigeria: Manufacturers Kick As Alcohol, Tobacco Excise Duty Begins Today

The Manufacturers Association of Nigeria (MAN) and members of the Organised Private Sector (OPS) have kicked against the implementation of the recently approved excise duty for alcoholic beverages and tobacco, which takes effect from today.

President Muhammadu Buhari had approved the amendment to the excise duty rates in March.According to MAN President, Dr. Frank Jacobs, efforts to get government to rescind its decision was unsuccessful as the operators were asked to wait till government chooses to review the tariff.

"We are not happy with that answer as this is going to affect most of the companies that produce such items. Many of them are going to close shop. We cannot produce competitively as many will close shop except for those producing using under-hand tactics.

"We will continue to engage government to let them to see reason with us on this issue," he added.For Nigerian Breweries Plc, the firm noted that measures are underway to assuage the impact of such increase, which will be transferred to consumers, by intensifying its cost-saving measures.

The Minister of Finance, Kemi Adeosun, had said that the duty would reduce the health hazards associated with tobacco-related diseases and alcohol abuse.Organised labour also warned that over 20,000 jobs may be lost due to the increase in the excise duty on alcoholic beverages and tobacco.

National President of National Union of Food Beverage and Tobacco Employees (NUFBTE), Lateef Oyelekan, said employers in the industry have notified the union that they may have to downsize as the new tariff would impact on the cost of production.

A statement from the ministry of finance had said: "The Tariff Technical Committee (TCC) 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. "The effect of the excise duty rates adjustment on trade and investment was also assessed by the federal ministry of trade and investment and it adopted the recommendations of the TTC.

"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."The minister had said under the new rates for tobacco, in addition to the 20 per cent ad-valorem rate, each stick of cigarette will attract one naira specific rate.She said by 2019, tobacco will attract two naira specific rate per stick while it will attract N2.90 kobo specific rate per stick by 2020.

Under the review, beer and stout will attract 0.30k per centilitre (Cl) in 2018 and 0.35k per Cl each in 2019 and 2020.Wines will attract N1.25k per Cl in 2018 and N1.50k per Cl each in 2019 and 2020; while N1.50k per Cl was approved for spirits in 2018, N1.75k per Cl in 2019 and N2 per Cl in 2020.

Meanwhile, to contend inflation induced by excess liquidity in the system in 2017, the Central Bank of Nigeria ( CBN) last year deployed Open Market Operation ( OMO) instruments worth over N13.762 trillion , the apex bank has revealed in its 2017 last half activity report just released.It said Nigerian Treasury Bills (NTBs) complemented these fiscal injections. In order to mop up the excess liquidity, OMO auctions were conducted frequently, pointing out however, that the frequency of auctions abated in November and December in response to various developments in the financial markets.

According to the report : " Total CBN Bills offered at the OMO was N13,762.94 billion, while public subscription and sale amounted to N12,344.90 billion and N11,346.48 billion, respectively, compared with N6,726.67 billion, N10,294.41 billion and N7,859.62 billion offered, subscribed and sold, respectively, in 2016 ."It explained that the high level of activity during the review period was attributable to the increased number of auctions to moderate the excess banking system liquidity, occasioned by the payments of statutory revenue to the three tiers of government, other fiscal disbursements and maturing CBN bills, amongst others.

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