Administering “Sugar Tax” in Nigeria: Things You Need to Know

Following the introduction of the Excise Duty (“Sugar Tax”) on non-alcoholic, carbonated, and sweetened beverages by the Finance Act of 2021 at the rate of N10 per liter, the Federal Government of Nigeria, commenced the implementation of Sugar Tax on the 1st of June 2022. Today’s Tax Thursday article covers some facts about the administration of the Sugar Tax that you should know.

History of Excise Duty in Nigeria

  • Customs and excise duty in Nigeria can be traced as far back as 1891 when the Royal Niger Company collection of Inland Revenue in the Niger Coast Protectorate was appointed to collect duties.
  • The Nigerian Customs Service was established by Customs and Excise Management Act (“CEMA”) No. 55 of 1958.
  • Excise duty was formally introduced into Nigeria30in 1962 as an ad Valorem tax on select locally manufactured goods.
  • The Nigerian excise regime was abolished in 1998% by a trade policy instrument under the General Abdulsalam regime. This abolishment was upheld by the Taxes and Levies (Approved List of Collection) Decree No 21 of 1998 as excise duty was not among the tax listed to be collected.
  • It was however partially re-introduced with effect from January 1999.
  • Originally, excise duty was imposed only on select locally manufactured goods.
  • 2019 the scope of excise was extended to cover select imported goods and was further extended to cover telecommunications services in 2020.

Excisable Items

The following are goods liable to Excise Duty in the Federal Republic of Nigeria

S/NGoods/Services subjected to Excise Tax 
2.Non-Alcoholic Beverages, Fruit Juice 
3.Beer and Stout 
5.Spirits and other alcoholic beverages 
6.Cigarettes and tobacco 
7.Perfumes and Other toilet Water, Cosmetics 
8.Soap and Detergent 
9.Corrugated paper or paper board and cartons, boxes, and cases made from corrugated paper and paper board. 
10.Toilet papers, cleansing or facial tissue. 
11.Telephone recharge cards/vouchers 
Note: Other goods that will be liable to excise duty and the rates applicable will be determined by the President in line with Section 13 of CETA.

Alcoholic products

1.Beer and Stout₦35/Litre

               Sugar Tax: What are we talking about?

  • In recent years, other drastic steps have been taken to increase the tax revenue: an increase of VAT rate from 5% to 7.5% by Finance Act 2019, an increase of EDT from 2% to 2.5% by Finance Act 2021, the inclusion of educational institutions in the tax bracket, the inclusion of Police Trust Fund, etc. Hence, the ruse of “aiming to reduce

Nigerian’s obesity levels” is conspicuous.

  • The question, however, is “would the revenue generated from the sugar tax contribute significantly revenue target for the year? Is the sugar tax worth it?”
  • The revenue target for taxation as shown in the 2022 budget is ₦10.1 trillion. Taxaide findings reveal that the government will be generating over ₦141.250 billion annually from the implementation of the sugar tax. Thus, revenue raked in from the sugar tax would form a 1.40% contribution to the revenue target of ₦10.1 trillion. This 1.4% contribution reflects revenue likely to be generated by the sugar tax alone without factoring in revenue that would be generated from excise paid on other commodities.

How is Excise Duty Usually Administered?

Excise duty in Nigeria is primarily regulated by the Customs and Excise Management Act (“CEMA”) CAP 45, LFN 2004, and the Customs, Excise Tariff, etc. (Consolidation) Act. (“CETA”) CAP C49, LFN 2004, and is collected by the Central Board of Excise and Customs.

As regards remittance of excise duty, manufacturers are generally required to enter a bond to pay the duty as at when due or make a cash deposit before manufacturing commences. Importers of non-alcoholic, carbonated, and sweetened beverages will be required to pay the applicable excise duty at the point of importing their goods into Nigeria.

This method of administration makes the excise regime in Nigeria has two (2) duty points.

  • The actual production figures from 1st to 20th of the month. • Estimated production figures from 21st to 31st of the month.

What Drinks qualify in this category?

In terms of Section 21 of the CETA, as amended, a duty is imposed on the Central Board of Excise and Customs (“Customs”) to collect “excise duty on non-alcoholic, carbonated, and sweetened beverages …charged at a specific rate of ₦10 per liter”.

Although the CETA does not define the meaning of the words ‘nonalcoholic’, ‘sweetened’, ‘carbonated’, or ‘beverages’, the Merriam-Webster Dictionary defines them as follows:

  • sweeten – “to make sweet”;
  • carbonate – “to combine or infuse with carbon dioxide”;  non-alcoholic – “not containing alcohol”; and beverage – “a drinkable liquid”.

Going by the surface meaning of the words used in Section 21 of the CETA, especially the word “and”, it can be concluded that before the sugar tax would apply, 3 conditions must compound to wit: the product must be non-alcoholic, the product must also be carbonated, and finally the product must be sweetened.

Going by the above interpretation, the duty imposed under Section 21 of CETA would apply to all soft drinks, (e.g., coke, Fanta, La Casera, Pepsi), malted drinks (e.g., Maltina, Hi-

Who bears the cost of the administration of the Sugar Tax? The Sugar Drinks Manufacturer or Government (Deductibility for CIT purposes)

  • The cost of administering the sugar tax would be relatively high as accommodation and office space must be provided for the revenue officials who would position themselves at taxpayer plants to monitor the amount in liters of beverages produced.
  • Although the amendment to the CETA does not specify who would bear the cost of administering the sugar tax whether the Government or the manufacturer, Section 24 (1) of the Companies Income Tax Act (“CITA”) allows taxpayers to deduct expenses that are wholly, reasonably, exclusively, and necessarily (“WREN Test”) incurred in the production of profits chargeable to tax. It can be argued that the cost of administration of the sugar tax would pass the WREN test.

Unfinished Products/Goods Lost in Transit: A Case for their Deductibility for Excise Duty Purposes

• Since manufacturers would have paid the sugar tax at the point of production, it appears that no allowance can be made for spilled goods, defective goods, or goods lost in transit. This implies that the Manufacturer would bare excise duty for items    it eventually makes no sales from.

Possibility for Automation

Automation of the excise duty administration would significantly alienate the manual process of having custom officials take counts of daily production numbers. The manual process is also factored into the payment system whereby the monthly figures are produced by the customs officials and sent to the Area Command to produce the excise figure to be paid by the


  • The call for automation put simply is more cost-effective as it would cut across both ascertaining the excise to be paid through metering of the factories to ascertain production numbers in real-time, as well as a platform for filing and making payments online.

Review Of Automation Processes

1. Raw material usage (this gives real-time insight into the raw materials used in producing a unit of the finished goods);

2. Daily production figures (records should be stored for 10 years);


3. Payment (a payment gateway can be synced to the platform such as Taxitpay);

4. Receipting.

5. Auditing (becomes seamless as a request for documents by Customs to Manufacturer can be done on the platform and the Manufacturer uploads the requested documents).


1. Administer new General Excise Regulations to be made by the President of the Federal Republic of Nigeria to be in line with current events as the 1965 regulations are outdated with only 18 provisions and were abolished in 1998. The Custom currently relies on The Nigerian Fiscal Policy 2022 for the administration of the ₦10 per liter excise duties on carbonated, sweetened, and non-alcoholic drinks. This would enable the effective administration of the new excise regime.

Some of our recommendations in the new regulation are:

  • Complete automation of the process which would bring about the removal of customs officials from the Manufacturing plants as this system is archaic and not in line with modern standards. Automation would bring about a real-time feed of production numbers;
  • Routine supervisory visits to Manufacturing plants by Customs officials;
  • Reconsideration of the excise duties currently being enforced as its’ significance in comparison to the Total Revenue target from taxation is still less than 5%.

2. There should be a harmonization of the taxes in Nigeria in line with the National Tax Policy of 2017 which required the reduction of taxes. Rather there has been an introduction of the following taxes since the Policy was issued:

  • National Agency for Science and Engineering Infrastructure Levy (at 0.25% of Profit before tax for annual turnover above 100million);

Nigerian Police Trust Fund Levy (at 0.0050% of Net Profit); We have seen increments of the following taxes since 2017:

  • Tertiary Education Tax (from 2% to 2.5%);  Value Added Tax (from 5% to 7.5%).

3. The current system does not factor in spillages at the point of production but rather aims to charge the excise duties on total production figures inclusive of spillages and goods in transit. We solicit that the Government set a threshold for spillages and goods lost in transit that have been properly documented to be exempted from the excise duties charged (can be capped at 5% of total production).