Customs Reinforces Reasons For Excise Duty On Non-Alcoholic Drinks

By Kenneth Jukpor
Customs Reinforces Reasons For Excise Duty On Non-Alcoholic Drinks
Comptroller Dera Nnadi

Comptroller Dera Nnadi is the Area Controller of Ogun 1 Area Command, Idiroko border. In this exclusive interview with MMS Plus newspaper, the Customs boss shares his thoughts on the proposed re-introduction of Excise Duty payments on non-alcoholic drinks and implications in the African Continental Free Trade Agreement (AfCFTA).

Following the recent one-day business discourse organized by MMS Plus newspaper themed: “X-raying the Proposed Excise Duty Regime for Carbonated Beverages in a Recovering Economy,” Comptroller Nnadi opted to shed more light on the issue, giving far-reaching consequences of not collecting excise duties on Nigerian products as the implementation of AfCFTA draws nearer. He also explains an opportunity for economic dominance for Nigeria under the AfCFTA regime using a successful Chinese model. Enjoy it:

His words:

Under AfCFTA, Nigeria may end up being the supplier of soft drinks because it’s going to be very cheap. If that’ll be the case, at what expense would these products be very cheap? Do we produce all the raw materials used in producing the product in Nigeria? If we produce these concentrates in Nigeria and manufacture the soft drinks, we can dominate the African market.

Nevertheless, if we are going to import the raw materials, especially sugar, produce cheap and sell free, then Nigeria will be the biggest loser. So, we better tax it. That would have been my opinion at the excise-duty conference, if I had been privileged to attend. The products would be costly but there would be value-addition. The process of accessing and developing some of the raw materials in-country would also mean significant job creation and economic growth.

A lot of the headlines from that summit led with the possible losses to the manufacturers, but it would have been balanced if the advantages to the Nigerian government were also placed side-by-side so that the Finance Ministry and Nigeria Customs Service (NCS) could really see varying aspects of this issue. Perhaps, a more rewarding approach would be to manufacture sugar locally. The idea of these stakeholders’ engagement shouldn’t be to shoot down a policy, but streamline the policy in a way that it would benefit everyone.

The implementation of this policy may be inevitable, especially with the continental free agreement. We can’t operate in AfCFTA when we don’t tax our products. If we say we are manufacturing and it labels every product, ‘not-for-export’, there would be a need for Customs to intensify efforts to police the border. This is because there would be pressure from neighbouring countries to access these products at much cheaper rates in Nigeria.

Sometimes, we find products manufactured abroad and sent specifically to the African markets. Some people misconstrue this to mean that the foreign nations send products to Africa to kill Africans. The idea most times is market segmentation. When HP is producing a particular product, they are tracking their sales to know their market share in a particular region. Given these stats, they could say the product is for sale in this continent and not for sale in other regions. This is where the rules of origin come in.

If we manufacture products and say they are not for export, Nigerians will consume it even though they will be very expensive. Since Nigeria has signed the ECOWAS Trade Liberalization Scheme and AfCFTA, if the nation decides not to place excise duties on its products, we could have a situation where trailers would queue up to buy soft drinks in Nigeria but the economic benefits wouldn’t accrue to the nation.

Nigerian manufacturers can decide to substitute the imported concentrates with local materials. This accounts for why Nigerian products like rubber slippers are exported to countries like the Central African Republic and Dangote cement is sold in Gambia and cigarettes produced in Nigeria are sold in Gambia. These products aren’t only available in these distant nations, but they’re also cheap because the indigenous producers don’t pay taxes when compared to their counterparts in other countries. I expected some of these queries to also be addressed as we engaged stakeholders on the proposed excise duty collection. These are issues that the Nigerian manufacturers are aware of and they can’t deny these privileges.

It’s always wrong to have businessmen blackmail the government, especially at instances when they are about to take some decisions that would have a significant impact on the future of the nation. Although I’m not a fan of comparing countries, but when I went to Ghana for an exercise on road transit goods between Ghana’s Tema port and Burkina Faso, I tried buying a sachet of Emzor paracetamol which costs N100 in Nigeria but it was sold for an equivalent of N4000 in Ghana. The price of coca-cola in Ghana is about N2000. Nigerians don’t see these differences. When AfCFTA completely opens the trade borders, Ghanaians will simply come to Nigeria to buy these products if we don’t collect excise duties and taxes on them.

On the other hand, Nigeria could choose to emulate China by opening its trade without taxes to allow other countries to become dependent on Nigerian products and give 4-5 years period when the manufacturers in those nations would have shut down, then Nigeria increases the price. This is what China does to Nigeria’s textile industry and tyre industry. They have also introduced it in the shoe sector. They produce cheap items of popular brands like Nike shoes that would have cost N80,000 and above, but sell from N6,000 to N40,000 and flood the market with it. You find shoes close that the Italian or American standard would cost over N100,000 made available by China for less than N40,000.

Have you observed that Nigerians wear jumpers with sport shoes? Sport shoes aren’t prohibited by Customs but fashion shoes are prohibited. So, China has flooded the Nigerian market with sports shoes. These shoes are cheaper than you can get from other countries and the standards are very close to the best. China encouraged Nigerians to use sport shoes as a fashion statement with any attire and promoted it on social media. Celebrities are wearing it and other Nigerians have copied it. This way, China has beaten Nigeria’s import prohibition on shoes and succeeded in selling its products.

These are deliberations that should be done on the proposed excise duties and it really goes beyond Customs.

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