Soft Drinks Tax: One Tax Too Many For Nigerians
The traffic is at a stand-still on the Yaba-Maryland expressway in Lagos. In the humid 34 degrees celsius weather typical of Lagos State, Tunde calls over a vendor for a cold bottle of his favourite soda (referred to as soft drink, in Nigeria), but was told the price has increased by ten Naira because of the Sugar Tax imposed by the Federal Government of Nigeria. He heaved a sigh of sadness, as he thought of the inconvenience of getting home if he should buy a bottle of soda at the extra cost of Ten Naira. He quietly signalled the vendor away.
This is the reality of many Nigerians in the wake of the New Year 2022, when the Federal Government added a new tax of N10 per litre imposed on all non-alcoholic and sweetened beverages produced and sold in Nigeria. At the end of the year 2021, consumers suffered from an inflation rate of over 15% amid the increasing cost of food products by 100% and more from the original price. This in part was caused by the economic policies of the present administration which included the closure of land borders to the importation of food items, and in part, by the rising insecurity in the country that has affected farmers, and consequently, food production, leading to the scarcity of farm produce.
However, as Nigerians are struggling to afford scarce and expensive food items, the government decided that an extra Ten Naira on fizzy drinks, called the Sugar Tax, would not affect the pockets of the masses. The government claims to fight obesity and other sugar-related diseases with this new tax, and also increase government revenue, annually. For a government that is borrowing money from the nation’s Pension Fund meant to cater for retirees, I believe that revenue generation is the main reason for this tax and not the health of Nigerians. After all, almost all Nigerian foods are full of carbohydrates and remain a worrying cause of diabetes among the populace and health professionals, yet no government policy is in place to prevent or reduce the production and consumption of these foods.
Soft drinks have, in a way, become a part of the meals taken by Nigerians daily. Restaurants and fast-food chains collaborate with the companies that produce soft drinks to advertise and promote their products and businesses. Some meals come as a “combo” with any favourite soft drink in most fast food outlets. Adding a Ten Naira tax on any soft drink produced will affect these businesses as consumers are already burdened with the rising cost of food. Soft drinks are most likely to be avoided by regular consumers for a while before they adjust to the new price (or not).
Companies that produce these drinks may need to slow down production or focus on reducing their inventory, as demands for their products will decline because of the new tax in place. The staff of these companies may be negatively affected in one way or the other, and being consumers in their own right who need to take care of their families, there would be a reduction in their purchasing power as their salaries may be affected also.
The tax on soft drinks in Nigeria can clearly be seen as discriminatory. For consumers of soft drinks, it is puzzling that this new tax has to be placed on their favourite beverages without any concrete reason for it.
The average man that relies on a quick meal with a soft drink will have to look for other alternatives that may not be totally healthy, as market forces are quick to cover any gap in demand. For a country grappling with high inflation, where consumers suffer from the effects of short-sighted economic policies and food insecurity, a ten Naira tax on soft drinks may just be another nail in the coffin for consumers.
The campaign promise of “one meal a day” by the present administration seems to be only an irony, as one more item is about to be taken off consumers’ daily menu. This is an irresponsible move by the Nigerian government and would be counted as one of the policy failures of the present administration.
Chukwuemeka Ezeugo is a Policy Fellow at the Foundation for Consumer Freedom Advancement.