Soft drinks tax hike harmful to economy – CPPE

The Centre for the Promotion of Private Enterprise has asked the Senate Committee on Finance to discontinue its proposal to increase excise duty on non-alcoholic beverages, warning that the move is counterproductive and potentially harmful to national economic recovery.

Director of the CPPE, Dr Muda Yusuf, noted in a statement that the proposal arrived at a time when manufacturers, Small and Medium-sized Enterprises, and retailers were battling macroeconomic pressures, including inflation, high energy costs, foreign exchange volatility, and weakened consumer demand.

He stated that “the proposal to further increase excise duty on non-alcoholic beverages is economically disruptive, socially harmful, procedurally flawed, and inconsistent with Nigeria’s broader development and industrial policy objectives.”

Yusuf noted that the beverage industry had absorbed multiple shocks in the last three years, with prices rising by about 200 to 300 per cent due to inflation and earlier excise adjustments.

He warned that many operators were already struggling to stay afloat, saying, “Introducing a new round of excise increases under these conditions will weaken operating capacity, reduce output, erode purchasing power, and lead to avoidable job losses.”

Yusuf added that another wave of factory closures or layoffs would hurt the fragile economic recovery. “The economy cannot afford avoidable disruptions at this delicate moment,” he stressed.

The CPPE director further noted that higher taxes would push retail prices up and worsen the cost-of-living crisis for households. He cautioned that the measure could threaten thousands of jobs across manufacturing, supply chain, logistics, retail, and the informal sector.

Yusuf explained: “Contrary to assumptions that higher excise rates translate to higher revenue, the opposite is more likely. When consumption declines due to price increases, revenue falls.”

The organisation also raised the alarm that the proposal would place heavier pressure on small businesses in the sector, warning that many SMEs risked being forced out of operation.

The CPPE further faulted what it described as “procedural inconsistencies” around the proposal. It queried how that excise policy falls under the Minister of Finance, yet the move appeared to be led by the Senate Committee on Finance and the Minister of Health.

The think-tank lamented that key committees such as Industry, Customs and Trade & Investment were not fully engaged and that “there is limited evidence of inter-ministerial consultation, economic impact assessment, or stakeholder engagement.”

On health concerns, Yusuf argued that taxation of soft drinks alone amounted to a narrow approach. He stated that the sugar consumption in Nigeria came from multiple products, including pastries, bread, confectionery, milk beverages and carbohydrate-heavy staples. He stated, “A holistic public health strategy is needed. Global evidence shows that behavioural change—not punitive taxation—is the most sustainable path to improved health outcomes.”

The CPPE urged the Senate Finance Committee to reconsider the proposal. It also asked the Presidency and the Ministry of Finance to reaffirm the executive’s authority in setting excise rates, insisting that tax-rate setting “should remain an administrative function, not legislated into the Customs and Excise Act.”

Yusuf called for stronger collaboration between government and industry, saying manufacturers were willing to promote healthier options, including low-sugar and zero-sugar variants. He stated that, “Nutrition education and awareness campaigns are more effective and less socially disruptive.”

He urged the Ministry of Health to prioritise non-tax public-health interventions and encouraged industry players to strengthen voluntary sugar reduction programmes and responsible advertising.

The CPPE concluded that Nigeria needed policies that supported manufacturing competitiveness and job protection, not measures that could undermine recovery. “The proposed increase in excise duty threatens to jeopardise livelihoods, welfare, investment, and long-term industrial development. We strongly urge its withdrawal,” Yusuf concluded.

Earlier, The PUNCH reported that the members of the Organised Private Sector of Nigeria, comprising the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture; Manufacturers Association of Nigeria; Nigeria Employers’ Consultative Association; National Association of Small and Medium Enterprises; and the National Association of Small Scale Industrialists, called on the Federal Government to withdraw the proposed amendment to the Customs, Excise and Tariff Bill, warning that it could undermine President Bola Tinubu’s fiscal reform agenda and further fracture Nigeria’s tax framework

The OPSN, in its position paper, declared that the proposed amendment was “misaligned with the Federal Government’s fiscal reform direction and contains several legal and administrative gaps.”

It stated that although the non-alcoholic drinks sector supported government revenue and public health goals, policies “must be holistic, harmonised and context-appropriate” to avoid undermining jobs, investment and industrial stability. (Punch)