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Impact of potential increase of sugar tax

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By Usman Oladimeji

Experts said imposing more taxes could worsen economic challenges.

The private sector stakeholders in Nigeria are expressing worries about the potential increase in the Sugar-Sweetened Beverage (SSB) tax. They believe that this tax hike could have a detrimental effect on the sector, which is already facing difficulties due to the country’s economic challenges. Industry experts caution that imposing more taxes could worsen the current economic challenges, which include high inflation, unemployment, public debt, and poverty rates. Analyzing the value chain shows how the suggested SSB tax could have extensive consequences.

A recent analysis indicates that SSB taxes may have a significant negative impact on various sectors, from manufacturing to small retailers and low-income customers. The World Health Organization (WHO) Guidelines Review Committee’s latest evaluation of the effectiveness of SSB taxes has once again highlighted the lack of concrete evidence, leading to the inability of WHO to classify SSB taxes as a top intervention strategy. Such selective taxation has been shown to have detrimental economic impacts, contradicting Nigeria’s policy approach aimed at increasing sugar production and stimulate job growth.

Raising the SSB Taxes will surely hinder NSMP goal.

Based on all indications, it appears that the planned increase in taxes could negatively impact the balance of demand and potentially impede the goals set out in the Nigerian Sugar Master Plan (NSMP) to achieve self-sufficiency in sugar production. The decision to extend the National Sugar Master Plan by 10 years was made with the goal of increasing investments in the sugar industry and helping the country reach 70% self-sufficiency in sugar production as soon as possible.

While the government has shown its support for the NSMP, which aims to diversify the economy with agriculture and industrial manufacturing, raising the SSB taxes significantly will surely hinder the achievement of its goals. It is important to remember that the Finance Act of 2021 introduced an SSB tax of ₦10 per litre on non-alcoholic and sugar-sweetened beverages. Nevertheless, in light of recent developments, there seems to be a growing demand from certain groups to raise this tax by 1,200 percent to ₦130 per litre.

Implementing taxes on sugary drinks will weigh on consumers.

Organizations like Corporate Accountability and Public Participation Africa (CAPPA) are advocating for these measures in an effort to reduce the consumption of excessive sugar, a factor they argue contributes to the rise of conditions such as obesity and diabetes. After studying the situations in various other nations such as Finland, Ireland, Mexico, Chile, and the United Kingdom, it has been observed that implementing taxes on sugary drinks has not resulted in notable improvements in healthcare, as these countries are still struggling with an increase in obesity rates. In contrast to the beliefs of those in favour of a tax on sugary beverages, Nigeria does not face an issue with excessive sugar consumption.

Report by the National Sugar Development Council (NSDC) shows that the country’s sugar consumption is below that of many other nations. It is clear that implementing taxes on sugary drinks will mainly result in consumers bearing the brunt of the price adjustments. It has been argued that in Nigeria, adding more financial strain to already struggling consumers will only exacerbate their economic woes. Some believe that implementing fiscal policies on sugary drinks demonstrates the government’s ability to encroach on individual liberties.

Related Article: Implementation of 20% tax on SSBs – NASR

When taxes are introduced in most cases, consumers tend to seek out lower-cost alternatives, which are often unhealthy and lack regulation. Despite these difficulties, the beverage industry is advocating for a comprehensive, collaborative strategy to address the issues of obesity and other non-communicable diseases. Now is the ideal moment to engage in productive discussions with policymakers in order to develop evidence-based solutions tailored to the current circumstances that effectively tackle public health issues. As Nigeria faces an uncertain future, it is crucial to work together and implement practical strategies to address these challenges.

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