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Nigeria's Sugar Tax, How Far?

For the purpose of addressing the increasing rates of obesity and other sugar-related diseases in Africa's most populous nation, the Nigerian Government implemented a excise tax on sugary drinks in 2022.


This sugar tax also known as the sugar-sweetened beverages (SSBs) amounted to 10 Naira on each litre of all non-alcoholic and sugar-sweetened carbonated drinks (equivalent to US$0.02 per litre), was included in the 2021 Finance Act. Back in 2022 that meant increasing the price of a 50cl bottle of soda, which was 120 Naira, by 5 Naira. Even though 5% was lower than the reccomended 20% standard by World Health Organization (WHO), it was hailed as a step in the right direction.



Advocates of the implemented sugar tax celebrated the move and believed it would compel Nigerians who are high consumers of sugary drinks to consider cutting down on the sip. In 2022, it was approximated that Nigeria had more than 12 million individuals dealing with obesity and a sugar tax was an important tool for combating the non-communicable disease (NCD) outbreak in Nigeria, Africa's biggest economy.


The Manufacturers Association of Nigeria (MAN), among other critics of the tax, argued that implementing an excise duty of N10 per litre on non-alcoholic, carbonated, and sweetened beverages could result in Nigeria losing investments to other countries and added weight to cousnumers who were at the recieveing end of the cost.


The Director-General of MAN, Mr Segun Ajayi-Kadir in 2022 interview with Punch Newspapers kicked against the introduction of sugar tax in Nigeria at that time due inflation and the purchasing power of Nigerian Naira. The food and beverage subsector contributes 38% to the GDP and accounts for 22.5% of manufacturing jobs, creating over 1.5 million jobs. This tax could impact its performance significantly.



He also mentioned that studies suggest that implementing such tax on non-alcoholic beverages may lead to a 0.43% output decrease and a 40% revenue drop in the industry over the next five years.The government's revenue aspirations from the sugar tax may not be justified in the long run. It is estimated to generate N81bn between 2022 and 2025, which will not be enough to offset revenue losses from other taxes.


Some claims of the MAN DG have been contested by the NCD Alliance

These claims have been proven to be false. A world bank report concludes that “emerging evidence from independent evaluation and modelling studies consistently identifies net positive economic impacts from SSB taxes, including overall employment and productivity gains, and increased government spending from additional revenue."

HOW EEFECTIVE ARE SUGAR TAX?


In 2019, Task Force on Fiscal Policy for Health, led by WHO Global Ambassador Mike Bloomberg and former U.S. Treasury Secretary Lawrence H. Summers, released a report outlining strategies for countries to combat noncommunicable diseases (NCDs) through the imposition of taxes on detrimental items like tobacco, alcohol, and sugary beverages.



Part of the report proposed:


  • Countries should implement policies to reduce sugar consumption to combat obesity, diabetes, and other noncommunicable diseases. Taxing sugary drinks is a promising measure, despite limited data compared to tobacco and alcohol taxes. Without intervention, health issues will increase in the future.

  • Countries should establish simple, secure, and robust health taxes, such as flat-rate taxes, to prevent exploitation and manipulation. Regular updates should be made to adjust for inflation and income growth, maintaining the decreasing affordability of products.

  • Countries should enhance tax administration and enforcement to maximize health and revenue benefits, alongside raising health taxes.

Nigeria's 2022 sugar tax advocates have backed thier campaign with Michael Bloomberg led 2019 report on preventing Non-Communicable Diseases (NCDs) by taxing harmful products like tobacco, alcohol, and sugar-sweetened beverages (SSBs), aligning with World Helath Organization (WHO) recommendations. According to the task force, implementing tax hikes substantial enough to increase the prices of tobacco, alcohol, and sugary beverages by 50% in the next 50 years could potentially prevent more than 50 million premature deaths.


Over 50 countries around the world have implented sugar tax. The introduction of sugar tax or sugar-sweetened beverages (SSBs) taxes in various countries, including the UK, Mexico, and South Africa is reported to have effectively reduced sugar consumption from SSBs. Also, the implementation of sugar taxes has resulted in the reformulation of SSB products in the UK and various other countries, leading to a decrease in the sugar content of these beverages.



Mexico has large consumers of sugary drinks in a 2013 study which showed how sugar tax could become an effective strategy to be replicated elsewhere. The Mexican case study is an example of succesful implementation of sugar tax as public health strategy.


In January 2014, Mexico's government introduced a new sugar beverage tax of 1 peso per liter on non-alcoholic beverages containing added sugar (such as powders, concentrates, or ready-to-drink products) under the Special Tax on Production and Services. This tax, paid by the producers, resulted in approximately a 10% price hike for consumers.


As a consequence, consumption decreased by 11.7% among the poorest households and by 7.6% among the general Mexican population. A study by the Mexican National Institute of Public Health and the University of North Carolina found a 7.6% average drop in taxed sugary drink purchases in 2014-2015.


In 2018, South Africa introduced the Health Promotion Levy (HPL), a sugar-sweetened beverage tax of around 10%. This measure resulted in a decrease in individuals' sugar consumption: from 16.25 g per person per day before the tax, it decreased to 14.26 g right after implementation, and further declined to 10.63 g in the subsequent year.


WHAT NOW?


In 2024, advoctaes have recommended that the Nigerian Government charge N130/Litre tax on Sugar-Sweetened Beverages. A bottle of 50cl sodas now goes for as much as 400 Naira compared to 120 Naira when the sugar tax was signed into law. In May 2024, Nigeria's annual inflation rose to a new 28-year high of 33.95%.


Can Nigerians afford another increase in sugar tax?



A 2024 report by Corporate Accountability and Public Participation Africa (CAPPA) titled "The potential Fiscal and Health Effects of Sugar-Sweetened Beverage Tax in Nigeria" Indicates that increasing the SSB tax from N10 per liter to N130 per liter could result in significant revenue generation and enhanced public healthcare in Nigeria. According to the analysis, the excise tax revenue is expected to surge by approximately 927%, reaching 729 billion naira annually, which could be allocated for enhancing the health system in Nigeria.


Regarding the its health effects, this also indicates that the average obesity rates may decrease by 0.46% for males and 0.53% for females. Similarly, the average overweight rates could decrease by 0.42% for males and 0.37% for females.


A research revealed a lack of data related to SSB taxation in all seven countries in Sub-Saharan Africa (Botswana, Kenya, Namibia, Rwanda, Tanzania, Uganda, and Zambia). National surveys do not provide sufficient information on SSB consumption and household spending on SSBs. There is a lack of fiscal data on various taxes related to SSBs. Accessing accurate information on the soft drink industry is difficult.



Hence, timely, concise, and locally relevant evidence from multiple sectors is essential for informing policy development on SSBs. Cross-sector collaboration is required, and indicators for SSBs should be integrated into existing data collection tools for effective monitoring and evaluation of SSB taxation.


Even though, Nigeria was listed as part of the studies, doing research in Nigeria continues to be riddled with limited capacity, weak policy-research-linkages, irrelevant societal impact research topics, STEM-biased funding and other challenges reinforcing some of the findings of research done in the seven Sub-Saharan countries. Futhermore, the CAPPA research listed SSB individual level data collection as a challenge. Some of the data collected was based on feedback a singular member of the household used in the survey, which is insufficient to make concluisons about sugra tax in Nigeria.


Currently, there is no established official structure and timeline for the implementation of SSB tax enforcement that is accessible to the public. Little information on the proposed revenue and what the Nigerian Fedreal Government intends to do with it. Much of the voices are those of NGOs like CAPPA, Reduce Sugar Nigeria and critics like MAN. Suggestions from organizations like PharmAccess Foundation, Nigeria Health Watch are yet to be implemented at any level.


For example, in 2022, the Province of Newfoundland and Labrador in Canada which was first in the country to to propose a sugar tax of 20 cents per litre of pop was projected to raise $9 million in annual revenue tragted towards physical activity and prenatal infant nutrition initiatives, and school food programs. The project had a wesbite with details, publicly available budgetary allocation and there were different forms of public sensitization before the actual date it was signed into law, despite the controversy surrounding the tax.


According to an email sent to CBC News, the Finance Department reported that in 2023, tax revenue amounted to $11 million, which is 22 per cent higher than the initial projection.

Nevertheless, details of sales data relating to shopping behaviour have yet to be released.


Dealing with public health challenges requires a thorough, multifaceted strategy in a complex country like Nigeria. Approcahinmg implemyentaion from the "copy-and-paste" or fire brigade approach may not be effective as different taxation and policies using these methods have failed in the past. THe question is how Nigeria can make it work within the reality of its own economy.


Much emphasis has been more on increasing taxation to meet World Health Organization (WHO) standard instead of finding ways to sensistize the public considering the dire multi-dimesional poverty situation of millions living in Nigeria. As more Nigerians struggle daily to meet daily basic needs, a punitive taxation imposed could prove ineffective and can be abused.



Another approach could be piloting effective public education to include affoardable meal plans which Nigerian consumers may find valuanble in the inflation.These efforts raise awareness about the health consequences of excess sugar consumption and promote healthier beverage choices. However, sugar taxes may disproportionately impact low-income individuals, who may still consume sugary drinks despite higher prices, leading to an unequal economic burden.


In the absence of an offiocial implemtation structure for the first tax, how do you effectively measure progress made on N10 before pushing for an added N120? Also, if the price of sweetened drinks increase, only the poor may bear the burden, those with stronger economic means may likely still purchase. BEing that the choice is an excise tax, the cosnumer bears the biggest share of the tax burden.



Even so, there is no assurance that individuals in lower income brackets will refrain from buying sugar-added drinks due to a higher sugar tax, and a decrease in purchases does not necessarily lead to healthier food choices. This could lead to seeking more affordable alternatives that still satisfy the craving for sugar.


There is still a lot of work to be done to enhance fiscal and financial responsibility, including laws, across the three levels of government. It is necessary to take steps to refocus on strategies for the ongoing development and growth of Micro, Small, and Medium Enterprises, which will actively participate in the implementation of this sugar tax.








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