With the takeoff of its sugar tax that has seen the rise in prices of some soft drinks, carbonated drinks and sweetened beverages, the federal government is set to earn billions of naira to support the financing of its national budget.
LEADERSHIP findings show that the government will be raking in over N141.250 billion from implementation of the N10 sugar tax on soft drinks and dairy products alone annually.
The Nigerian government announced additional N10 excise duty tax on a litre of soft drinks this year to mobilise more revenues.
According to Statista, a global data firm, revenue in the soft drinks segment in Nigeria amounted to $24,048,550,877.00 in 2021, or N9.992 trillion. The market is expected to grow annually by 17.12 per cent. In global comparison, most revenue is generated in the United States ($310,945,886,001 in 2021).
In the soft drinks segment, volume is expected to amount to 14,713.5 million litres by 2026. The soft drinks segment is expected to show a volume growth of 0.5 per cent in 2022. That will then amount to 73,567,500 million litres of soft drinks that would be consumed in Nigeria this year.
The average volume per person in the soft drinks segment was projected at 57.02 litres in 2021.
In 2021, Nigeria’s population was estimated at 213 million individuals. Multiplied by the estimated population and the N10 tax rate, the federal government would be making over N121.45 billion revenue from that segment alone in a year.
Reports say there are currently over 100 soft drink brands made or bottled in Nigeria from about 15 bottling or drink manufacturers. Two-thirds of these are indigenous Nigerian firms.
In relation to total population figures per person, revenues of N47,258, or $113.76 (when multiplied by the official exchange rate of N415.53/$) were generated in 2021. By 2026, two per cent of spending and one percent of volume consumption in the soft drinks segment will be attributable to out-of-home consumption (e.g., in bars and restaurants).
Minister of industry trade and investment, Otunba Adebayo has disclosed that Nigeria’s annual production of milk stands at 672 million litres, against the annual demand of 1.6 billion litres, which hugely suggests that the nation’s production cannot effectively meet the demand.
The 1.6 billion litres of milk Adebayo said is consumed annually, when multiplied by the N10 sugar tax, will earn Nigeria N16 billion.
A report by Chi Limited, makers of juice products, say the share of juice consumption in Nigeria out of the total liquid market is only three per cent.
The report also showed that Nigerians drink more carbonated soft drinks (CSD) with 21 per cent of the liquid market. The global percentage of CSD is 11 per cent. The dairy share of the food drink market is 21 per cent in Nigeria.
Similar to that is the demand for bulk tea in the Nigerian market which the secretary-general of the National Coffee and Tea Association of Nigeria, Dr Usman Hassan Kakara, says is over 3.8 million tonnes. There are 1,000 litres in one metric tonne.
Companies like Top Tea and Uniliver use the semi-processed, which is the bulk tea, as raw materials. Companies like Uniliver, Hiltop Tea, Top Tea etc., import 3.8 million tonnes as source of raw materials. With each kilogramme sold for N1,100 per kg, Nigerian is in line to rake N3.8 billion.
While the Manufacturing Association of Nigerian (MAN) and labour union express fear that the new tax on soft drinks and beverages will affect the cost of products and affect companies’ workforce, experts say there is no need for such concerns. Nigeria’s population is enticing. It is more enticing for any manufacturer with a product that targets young people such as Coca-Cola, Pepsi, Sprite and Malt. Nigeria has the youngest population in Africa.
One of the advantages made by the authorities is that the new model has the potential to make organisations cut down their plastic footprint, empowering customers to use their own bottles or cups.
Nigeria’s labour union believes implementing increased taxes on non-alcoholic and carbonated drinks, which is one of the provisions in the 2021 Finance Act, will impose more hardship on the citizens and result in job losses. (Leadership NG)
