Nigeria’s 2022 Pro-Health Taxes

Nigeria’s 2022 Pro-Health Taxes

By a Circular dated March 1, 2022 (the Circular), Nigeria’s Honourable Minister of Finance, Budget, and National Planning, Dr. (Mrs.) Zainab Shamsuna Ahmed, announced Nigeria’s President Muhammadu Buhari’s approval of the country’s 2022 Fiscal Policy Measures (the Measures). The Measures broadly comprised of, the:

  1. introduction of supplementary protection measures for the implementation of the sub-regional 2022 to 2026 ECOWAS Common External Tariffs;
  • 2022 to 2024 introduction or increases (per Annexure 4 of the Circular) in Excise Duties rates on Non-alcoholic Beverages, Alcoholic Beverages, Cigarettes, Tobacco-Related Products, and Telecommunication Services; and
  • extension of extant policy measures to facilitate the importation of essential COVID-19 medical supplies as indicated by the duo of the World Health Organisation and World Customs Organisation.

In this TaxThursday, we focus on the 2022 to 2024 Excise Duties regime on: (a) Non-alcoholic Beverages; (b) Alcoholic Beverages; (c) Cigarettes; and (d) Tobacco-Related Products. The new regime is stated to take effect from June 1, 2022.

Non-alcoholic Beverages are described to include fruit juice and energy drink among others. Only Non-alcoholic Beverages do not have any indication of any rates in 2023 and 2024, as the newly introduced N10 per Litre Fixed or Specific Excise Duty rate, is stated to apply only in 2022. While this new introduction has been dubbed a “Sugar Tax”, given the expressed sentiments that the tax was introduced to discourage sugar consumption, Nigeria’s Non-alcoholic Beverage Industry continues to wait in bated breath for the Nigerian Government’s formal expression of incentives for Non-alcoholic Beverage Manufacturers that utilize reduced sugar content or healthier sugar substitutes. Please see Taxaide’s Engagement Session with Regulators and Manufacturers on Nigeria’s Sugar Tax held on Thursday, May 26, 2022.

Alcoholic Beverages are classified into the 3 categories of (a) Beer and Stout; (b) Alcoholic Wines; and (c) Whiskey, Brandy, Vodka, and Rum. Their new Excise Duties regime is diagrammed in the table below.

ClassificationYearRates
Ad ValoremFixed/Specific
Beer + Stout2022 N40 per litre
2023 N45 per litre
2024 N50 per litre
Alcoholic Wines202220%N50 per litre
202320%N60 per litre
202420%N70 per litre
Whiskey, Brandy, Vodka + Rums202220%N50 per litre
202320%N65 per litre
202420%N75 per litre

Cigarettes would see an Ad valorem Excise Duty rate increase from 20% to 30%. The new 30% rate will remain into 2023 and 2024. Fixed or Specific Excise Duties rates on each Cigarette Stick will however increase in the 3-year period as follows:

YearPer StickPer Pack (20 Sticks)
2022N4.20kN84.00k
2023N4.70kN94.00k
2024N5.20kN104.00k

Tobacco-Related Products are defined as: “other smoking tobacco, containing tobacco substitutes in any proportion, homogenized reconstituted tobacco, expanded tobacco, chewing, snuffing tobacco, and manufactured tobacco substitutes.” While mainstream media in Nigeria buzzed that the popular smoked product known as “Shisha” will be taxed under this regime, it is arguable that such will only be the case if the relevant “Shisha” has tobacco constituents, and that “Tobacco-free Shisha” may not be so affected. The new Excise Duties for Tobacco-Related Products are wholly of Fixed/Specific Rates as follows:

YearFixed/Specific Excise Rate
2022N1,000 per kilogram or N3,000 per litre
2023N1,500 per kilogram or N3,500 per litre
2024N2,000 per kilogram or N4,000 per litre

General Commentary: It currently appears that, other than the Circular, no other documentation or codification exists of the new Excise Duties rates. Thus, it should be the case that until Section 13(1)(3) of the Customs, Excise Tariff, etc. (Consolidation) Act, 1995 (as amended and currently compiled as Cap. C49, Laws of the Federation of Nigeria, 2004) (CETA) is complied with, the new Excise Duties Rates should not take effect. The Section requires that the Nigerian President may upon the recommendation of Nigeria’s Tariff Review Board and by an Order, impose, vary or remove any Excise Duty; with such an Order not taking effect until it is published in the Federal Government’s Gazette. Accordingly, and until there is a Gazette of the President’s Order (which should have been precipitated by a recommendation of the ‘Tariff Review Board’), the new Excise Duties regime should not be effective.

Subsequently, the Nigeria Customs Service, which is statutorily saddled with the responsibility of implementing Nigeria’s Excise Duties must come up with appropriate world-class Regulations that would ensure the smooth sail of a tax process that must leverage good automation (software and hardware) for easier administration.

Finally, much as some expressed sentiments from the Nigerian Federal Government’s circles have been to the effect that the new Excise Duties were introduced to curb the unhealthy consumption of sugar, alcohol, and tobacco in Nigeria, much more may need to be done to justify these assertions. Indeed, the express creation or provision of incentives for manufacturers that produce healthier substitutes must be clearly communicated by the Federal Government. Such communication would perhaps see more investments in the provision of these substitutes. A consistent increment in Government’s tax revenue on these products would indeed be an antithesis to the professed reason for the introduction of these pro-health taxes.

Please do not treat the foregoing as tax advice as it is only an expression of our Tax Information Service. All enquiries should please be directed to our TaxThursday Desk at resources@taxaide.com.ng; +234 700 TAXAIDE or any of our following personnel:

   Adeola Adefuye
Associate
a.adefuye@taxaide.com.ng  
         Bidemi Olumide
Partner
b.olumide@taxaide.com.ng  

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