Illicit alcohol trade undermines investments, job creation

Nigeria’s illicit alcohol trade is posing significant threats to investments, job creation, and government revenue, prompting calls for stronger enforcement and regulatory measures, according to SAMI TUNJI. Illicit activities, including counterfeit and smuggled products, operate outside the tax and regulatory system, avoiding excise duties, customs charges, and quality-control expenses.

As a result, legitimate businesses face an uneven contest, investing heavily in compliance and production while illicit operators profit without carrying the same costs. At a stakeholder workshop organized by the Spirits and Wines Association of Nigeria, industry leaders emphasized the need for coordinated regulation and tougher measures to protect consumers and the economy.

Illicit alcohol accounts for approximately 40% of wines and spirits sold in Nigeria, causing an estimated N428 billion in annual losses to the economy due to smuggling, counterfeiting, tax evasion, and illegal production. As the government strives to boost domestic revenue, expand manufacturing, and reduce reliance on oil income, the illicit alcohol market raises concerns about attracting long-term investment.

The commercial importance of the sector cannot be understated, with spirits valued at $2 billion and sweet wine at $400 million to $420 million annually. Over 55% of the market is comprised of beer, while spirits and wines make up 30% and 15% respectively. However, illicit producers avoid many of the costs associated with legitimate manufacturing, such as excise duties, regulatory inspections, and taxes, leading to cheaper counterfeit products that can undercut legitimate businesses.

This shift not only affects the balance sheets of alcohol companies but also has broader implications for the government's revenue and the supply chain.