Firm warns against steep tax hike on sugary drinks

Lagos-based policy firm ThinkBusiness Africa has cautioned against a substantial tax increase on sugary drinks in Nigeria. In a policy report titled 'Nigeria's CETA Bill, Fiscal Policy, and Health Outcomes,' the firm argued that such a hike could lead to higher prices for consumers and increased production costs without yielding significant public health benefits.

The report examined the proposed amendment to the CETA Act, which was passed by the Senate last June and is currently awaiting consideration by the House of Representatives. The Senate's amendment replaces the existing ₦10-per-litre excise duty on sugar-sweetened beverages with a levy tied to retail prices, with the exact rate to be determined by the Minister of Finance.

While acknowledging the severity of diabetes, obesity, and hypertension, the firm highlighted that the evidence supporting taxes on sugary drinks is not definitive and requires further scrutiny. The report cautioned against equating reduced purchases with reduced obesity levels, as chronic diseases are influenced by a variety of factors.

Furthermore, the firm expressed concern over the proposal's timing, citing the economic challenges already faced by Nigerian households and businesses. The Manufacturers Association of Nigeria estimates that around 1.5 million jobs depend directly or indirectly on the beverage sector. Additionally, data from the National Sugar Development Council shows a decline in total sugar consumption from 2022 to 2023, despite the existing SSB levy.

ThinkBusiness Africa emphasized the importance of reviewing the existing SSB levy before implementing a more significant tax increase. The firm suggested alternative approaches, such as sugar-content-based taxation, citing the United Kingdom as a model that incentivizes manufacturers to reformulate products and reduce sugar content.