Private Sector Sounds Alarm: New Beverage Tax Could Spark Job Cuts and Stifle Growth

Written By: Flipbz.org

Nigeria's business leaders are raising red flags over a sweeping tax proposal on sugary drinks, warning it could unleash a cascade of economic woes including widespread layoffs, slashed investments, and shrinking government coffers.

In a pointed appeal to lawmakers, the Organised Private Sector of Nigeria (OPSN), a coalition that brings together heavyweights like the Manufacturers Association of Nigeria and the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, called for an immediate rethink of the bill amending the Customs, Excise and Tariff laws. At its core, the plan floats a hefty 20 percent levy on every liter of retail-priced non-alcoholic beverages, targeting sugar-sweetened options in particular. Proponents, including advocacy outfits like Corporate Accountability and Public Participation Africa, argue it would curb soaring health issues tied to excess sugar by making the drinks pricier and less appealing.

But OPSN paints a far grimmer picture. "Any tax policy must be holistic, context-appropriate, and harmonised with national industrial priorities to avoid unintended economic consequences," the group stated in a recent position paper. They contend the levy would jack up production costs overnight, forcing companies to dial back operations and pass the pain to consumers through steeper shelf prices. With households and mom-and-pop shops already reeling from inflation's bite, this could spark a vicious cycle: fewer sales, shuttered factories, and a boom in black-market alternatives.

The stakes are sky-high for the non-alcoholic beverage industry, which props up 1.5 million jobs and funnels 40 to 45 percent of its gross earnings straight into tax revenues. It's a linchpin in broader efforts like the Nigeria Sugar Master Plan II, fostering local sourcing and cutting reliance on imports. Yet thin profit margins, hammered by currency woes and supply chain snarls, leave little room for such a shock. OPSN fears the tax could unravel this vital non-oil revenue stream, clashing head-on with President Bola Tinubu's push for streamlined fiscal reforms and a friendlier business climate.

Critics within the private sector spotlight deeper flaws in the proposal. It risks fragmenting an already patchwork excise system, riddled with legal quirks, math mismatches, and rollout headaches that could make enforcement a nightmare. Worse, it sailed through preliminary National Assembly reviews without input from key players like the Ministry of Finance or the Presidential Fiscal Policy and Tax Reform Committee, leaving fiscal watchdogs in the dark.

Drawing on global lessons, OPSN highlighted how aggressive soda taxes in cash-strapped nations often backfire spectacularly. "Steep or ambiguous Sugar-Sweetened Beverage taxes in low-income economies often lead to job losses, contraction of MSMEs, revenue decline, growth in informal markets, and increased inequality, without clear public health benefits," the group noted. They pointed to potential hits on value-added and corporate income taxes as sales tank, ultimately starving the Federation Account and fueling inequality.

The beverage sector isn't alone in feeling the squeeze. Small and medium enterprises, already battling high energy costs and erratic policies, could see their ranks thin out as suppliers and distributors fold. Exports might suffer too, eroding Nigeria's competitive edge in regional trade.

Rather than rushing ahead, OPSN is pushing for a collaborative reset. They urged keeping excise rates steady on non-alcoholic drinks while opening lines of communication with legislators, tax experts, and community voices. "Predictable, simple, and non-disruptive tax policies are essential for economic stability and investor confidence," they emphasized. Future tweaks, they added, should zero in on bolstering jobs, drawing in capital, and safeguarding long-term fiscal health, all while weighing the real-world ripple effects on factories, farms, and family budgets.

As the debate heats up, the private sector's plea underscores a broader tension: balancing public wellness goals against the raw economics of a fragile recovery. Lawmakers now face a pivotal choice, one that could either fortify Nigeria's industrial backbone or leave it cracked under the weight of hasty reforms.