Much Ado About Excise Tax on SSBs 

The agitation for increased excise duty on Sugar Sweetened Beverages is once again troubling manufacturers in the beverage industry amidst  raging global energy disruptions, writes Dike Onwuamaeze 

For the umpteenth time the campaign to increase the excise duty on Sugar Sweetened Beverages (USB) is rearing its head. Like a recurring decimal, the campaign is once again a subject of legislative agenda of the National Assembly. One of it arch proponents is Corporate Accountability and Public Participation Africa (CAPPA).

CAPPA is urging the National Assembly to make utilise the unique opportunity of working on a bill for the amendment of the excise duty to strengthen Nigeria’s weak tax on non-alcoholic, sweetened beverages and protect millions of Nigerians from preventable non-communicable diseases (NCDs).

 According to CAPPA, the Senate has been on this process since 2025 when it started work on a bill seeking to replace the current flat N10-per-litre excise duty on SSBs with “a percentage-based levy tied to retail price, and to earmark part of the revenue for health promotion, was introduced.”

The bill is formally titled, “A Bill for an Act to Amend Section 21(3) of the Customs, Excise Tariffs, Etc. (Consolidation) Act to Replace the Fixed Ten Naira (N10) Per Litre Excise Duty on Non-Alcoholic, Carbonated Sugar-Sweetened Beverages with a Percentage Levy Based on Retail Price, and to Provide for the Earmarking of a Portion of the Revenue for Health Promotion and Disease Prevention Programmes.”

CAPPA has described this bill as, “A significant policy turning point” stating that in November 2025, the Senate Joint Committee on Finance, Customs and Excise convened a public hearing in Abuja to take input from stakeholders across the country.”

CAPPA claimed that Nigeria has been facing an escalating burden of debilitating diseases linked to unhealthy diets aggressively promoted by ultra-processed food corporations at the expense of public health. 

According to CAPPA, “Nigeria now has over 11 million people living with diabetes, and thousands die each year from preventable complications. Nearly a third of all deaths are now linked to non-communicable diseases, a staggering human and economic toll.”

It claimed, “One of the most preventable drivers of this crisis is the excessive consumption of SSBs. Public health research – both local and global – clearly points to frequent intake of sugary drinks as increasing the risk of obesity, insulin resistance and elevated blood pressure, particularly among children and adolescents. In Nigeria, where preventive healthcare remains weak and treatment costs are high, this pattern is unsustainable.”

In 2021, the federal government reflected on the problem and introduced the SSB tax, a token N10 per litre excise duty on all non-alcoholic, sweetened, and carbonated drinks, through the Finance Act. 

This pro-health policy sought to discourage excessive consumption of SSBs, reduce Nigerians’ addiction to sugary drinks, and stem the rise in SSB-fuelled incommunicable diseases, and generate revenue.

But CAPPA said, “Though commendable as a starting point, the reality is that the N10/litre tax is, and has always been, grossly inadequate. The tax was fixed when the average 33cl bottle of SSB cost about N150. A little above three 33cl bottles equal one litre of SSB, meaning the tax was a mere N3.30 per bottle in 2012. 

“Today, with bottles selling for over N300, the tax is almost invisible. Clearly, the N10/litre tax is far too low to change consumer behaviour or meaningfully reduce sugar consumption.”

It added that “fixed-rate levies, like Nigeria’s current system, are easily absorbed by manufacturers and seldom influence consumer behaviour.”

CAPPA’s argument re-echoed  the views of the World Health Organisation (WHO) that such taxes only achieve meaningful reductions in consumption when they raise retail prices by at least 20 per cent. 

Currently, it said, that the National Assembly has proposed amendments to replace the flat-rate tax with a percentage-based levy tied to retail prices is crucial. 

But the question begging for an answer is whether the amendment of the excise duty as proposed fulfilled the cardinal principles of taxation, such as fairness, ability to pay amongst others.

This is the reason the Manufacturer Association of Nigeria (MAN) and other leading voices in organised private sector in Nigeria are opposed to increasing the excise duty on SSBs.

They believed that introducing new sector-specific taxes, especially on a sector already severely impacted by energy cost shocks and would contradict the government’s reform philosophy, create policy uncertainty, send negative signals to investors and undermine confidence in Nigeria’s manufacturing sector.

MAN in a recent statement on the US-Iranian Crisis for the Manufacturing Sector said specifically that three sectoral groups of MAN, namely the chemical and pharmaceuticals group, the basic metal, iron and steel group and the food, beverages and tobacco group would face “existential headwinds” even though the entire real sector would feel the pinch.

It said: “A rising tide of global conflict does not sink all ships equally; some sectors are fundamentally more exposed. While the entire real sector will feel the pinch, these specific sectoral groups within MAN face existential headwinds.”

Furthermore, MAN stated that the food, beverage and tobacco sectoral group that is highly dependent on imported grains and packaging materials will face price hikes emanating from severe imported inflation and escalating freight costs, which would directly impact the Nigerian consumer’s daily survival.

It said that the operating margins of manufacturers that rely heavily on gas and diesel to power operations would be wiped out by the global energy shock that is driving domestic pump and depot prices upward.

“Also, the global flight to safe-haven assets has strengthened the USA’s dollar, applying renewed depreciation pressure on our currency. The adverse ripple effects of these could arrive squarely on our factory floors,” MAN said.

On its part, The Centre for the Promotion of Private Enterprise (CPPE) said that it strongly opposes the call for additional taxation on SSBs as canvassed by the  (CAPPA). It argued that the proposal is ill-conceived, poorly timed, and inconsistent with the current administration’s tax reform agenda, which is anchored on reducing the burden of taxation on businesses, improving tax efficiency, and stimulating investment.

The Chief Executive Officer of CPPE, Dr. Muda Yusuf, said that at a time when the Nigerian economy is still navigating a fragile recovery, the imposition of new taxes on the manufacturing sector—particularly a highly energy-intensive segment such as the sugar-sweetened beverage industry—would be profoundly counterproductive and disruptive to growth, employment, and investment.

Yusuf argued strongly that the proposal for additional taxation on sugar-sweetened beverages is misaligned with Nigeria’s current economic realities, inconsistent with ongoing tax reforms, and particularly unjustifiable given the extraordinary energy cost pressures confronting the industry.

At a time when beverage manufacturers are grappling with surging fuel costs, weak demand, and shrinking margins, additional taxation would undermine business sustainability, threaten jobs across the value chain.

Yusuf pointed out that the Nigerian business environment remained extremely challenging for a crippling hike in excise duty. 

For him, key macroeconomic indicators, such as inflation, high interest rate, spiking energy costs and exchange rate deprivation of the Naira underscored the vulnerability of firms operating in Nigeria.

He said: “Inflation has remained elevated, significantly eroding consumer purchasing power. In addition, interest rates are at historic highs, with the Monetary Policy Rate (MPR) at over 26.5 per cent, translating to lending rates of 30 per cent+ for many businesses.

“Also, energy costs have surged sharply, with diesel prices rising by over 70 per cent, while petrol prices have increased by over 200%l per cent in the past two years, making self-generation of power prohibitively expensive amid weak grid electricity supply. Exchange rate depreciation at the onset of the reforms significantly increased the cost of imported inputs and raw materials.”

He averred that within this context, “the manufacturing sector—including the food and beverage industry—has come under intense strain, being one of the most energy-dependent sub-sectors in manufacturing.”

The SSB industry relies heavily on energy at multiple stages of production, including water extraction, purification, and treatment and for heating, pasteurisation, and carbonation processes.

It also relies on energy for high-speed bottling, canning, and packaging lines, refrigeration and cold-chain logistics across distribution networks.

Yusuf, therefore, summed up that, “the combined burden of soaring energy bills and extremely high distribution costs has significantly worsened the operating environment for beverage manufacturers, further weakening the justification for any additional tax on the sector.”

He said that evidence already showed that prices of beverages and other consumer goods have increased by over 50 per cent in the last two years. Sales volumes have declined due to weakened consumer purchasing power. While many operators—especially small and medium-scale beverage producers—are under existential pressure

“In this context, imposing additional taxes on an already energy-burdened sector would amount to a punitive layering of fiscal pressure on top of an unprecedented cost crisis, further weakening already fragile business fundamentals,” he said.

The food and beverage sector is a critical component of Nigeria’s industrial ecosystem and the largest employers in the manufacturing space. It supports an extensive value chain spanning agriculture and raw material supply (including sugar, fruits, and packaging inputs), manufacturing and processing, logistics and distribution as well as retail and hospitality.

In addition, the sugar-sweetened beverage segment plays a particularly strategic role because of its scale, distribution reach, and integration with multiple upstream and downstream sectors.

Given the energy-intensive nature of the industry, Yusuf said that additional taxation at this time would have amplified negative consequences, including accelerated downscaling of production due to unsustainable operating costs, closure of vulnerable small and medium beverage manufacturers, job losses across production, distribution, and retail segments, disruptions to agricultural supply chains linked to beverage production and increased informalisation of the sector as firms struggle to survive.

Therefore, at a time of already high unemployment and underemployment, such policy actions would exacerbate socio-economic vulnerabilities.

While CPPE acknowledges the rising incidence of non-communicable diseases such as diabetes, it said that it is important to emphasise that taxation of sugar-sweetened beverages is not a silver bullet for addressing these concerns.

It argued that public health outcomes are primarily influenced by broader lifestyle factors, including dietary habits across multiple food categories, physical inactivity and overall consumption patterns.

“Singling out a highly energy-stressed industrial segment for punitive taxation is therefore neither equitable nor effective. Global evidence on sugar taxes shows mixed outcomes, with limited long-term impact on health indicators in many jurisdictions, particularly where complementary lifestyle interventions are weak,” Yusuf said.

He said that a more sustainable approach should focus on public health education, awareness campaigns and promotion of healthy lifestyles and physical activity.

He also suggested improved access to preventive healthcare services and constructive stakeholder collaboration with industry players.