Amid the escalating inflation rate and the attendant frustration among the Nigerian people, emerging statistics show a consistent increase in beer consumption, resulting in higher profits by breweries and bumper revenue for the government, reports Festus Akanbi
It is bad enough that the global economy is slowing down with devastating consequences cutting across all the continents. Even the so-called developed economies are not spared as July inflation in the United Kingdom peaked at 10.1 per cent, the highest since 1982, while in the US, the consumer price index for July was 8.5%, which is said to be close to a multi-decade high.
Are Nigerians on Drinking Spree?
However, in Nigeria, the situation is worse because it is feared that the pervading mood of hopelessness unleashed by a combination of general insecurity, failed economic policies, and large-scale corruption is driving many Nigerians into depression.
Nothing best described the fact that the majority of Nigerians are frustrated with the prevailing situation as the spike in the Misery Index which moved from 59.4 per cent in December 2021 to 62.79 by July this year. It was a development that coincided with the bumper harvest recorded by major breweries in the first six months of the year, strengthening the claim that in their state of misery, more Nigerians may have been taking solace in beer consumption with a corresponding increase in excise duty paid by beer manufacturers in the first six months of 2022.
However, while virtually all the other sectors of the economy are fighting for their survival in the face of the current economic realities, beer manufacturers are smiling to the banks as alcoholic consumption rose sharply within the first six months of the year.
The latest figures compiled by Prime Business, an online news platform from the first quarter results of four major brewers in the country showed that Nigerians drank beer worth N599.11 billion in six months running from January to June 2022.
Also, over N68 billion was collected in form of Excise Duty on beer by the Customs Service between January and June.
Critics, however, raised the fear that with the growing level of misery and the harsh economic climate, the government might be making life difficult for local manufacturers. For instance, the federal government introduced a new excise regime in 2018 to address shortfalls in revenues; the new regime led to an increase of at least N30 per litre of alcohol consumed in the country.
Another increase to N35 per litre was implemented in June 2019. With another adjustment imminent, operators are already concerned about their survival, especially as inflation continues to make nonsense of chunk of individuals’ real incomes, limiting household spending. The government is accused of ignoring the peculiarity of her economic operating environment amid inflationary pressure, dwindling income growth, weak naira, and struggling economic growth, among others, which makes the survival of companies and households threatened, hence, the timing of such policy is considered by experts, a bad one.
Rising Revenue
As expected, the surge in beer consumption has translated to huge revenue for the federal government as the Nigeria Customs Service (NCS) collected over N68 billion between January and June, from excise duty on beer, spirits, and other alcoholic beverages, cigarettes, and tobacco.
The excise duty is levied on the manufacture, sale, and consumption of goods that fall under the excise control, which include but are not limited to beer, spirits, alcoholic beverages, tobacco, and cigarettes, which are collected across the country.
While presenting the half-year report of the service covering January-June, this year, the National Public Relations Officer of the service, Deputy Comptroller Timi Bomodi, recently disclosed that the Customs had commenced collections from traders producing carbonated and sugary drinks, which were newly added under schedule five of the Common External Tariff (CET).
Bumper Beer Sale
Findings showed that the high cost of production and inflationary environment is making Nigeria’s top beer (alcohol) makers focus more on improving their profitability and financial performance as against fighting for market share and brand awareness.
Between 2019 and 2021, beer makers have increased prices more than twice due to high excise duty, a levy on the manufacture of locally produced goods.
For instance, from sales of its products, International Breweries generated N111.40 billion within six months of H1 this year, in contrast to the N81.96 billion grossed in the same period last year – a difference of 35.9%.
Its net profit recorded a -97.5% decline, after failing to surpass the N13.88 billion profit after tax of H1 2021, as the firm reported a N336.20 million net profit in the first half of this year.
While Champion Brewery with its small share of the market, recorded the highest revenue growth of 41.6% during the period under review, making it the best performing firm in the industry. It generated N6.86 billion, against the N4.84 billion reported in H1 2021.
Guinness Nigeria reported 28.9% turnover growth, which rose to N206.82 billion in H1 this year, from N160.41 billion in H1 2021. It nevertheless recorded the highest growth in profit after tax, as it closed the first half of this year with N15.65 billion, which is 1146.7% year-on-year growth when compared to the N1.25 billion of H1 2021.
As for the Nigerian Breweries, which grew its revenue to N274.03 billion between January to June this year, the 30.9% growth rate when compared to the N209.21 billion turnover of H1 last year, makes it the third best performing firm in the market. It reported profit growth of 142.8% year-on-year, having declared a N19.08 billion profit in the first six months of 2022, surpassing the N11.22 billion profit after tax of H1 2021.
Rising Misery Index
Reports say that today, Nigeria has the greatest number of citizens living in extreme poverty with the inflation rate officially confirmed to have risen to 19.6 per cent, the highest in 17 years.
According to Steve Hanke, an economist at John Hopkins University in Baltimore, United States, who developed the index to assess the degree of hardships faced by citizens in their country, it is “the sum of the unemployment, inflation, and bank lending rates, minus the percentage change in real GDP per capita. Higher readings on the first three elements are ‘bad’ and make people more miserable.”
As the index rightly explained, the country’s misery ranking is laid at the foot of the economy and the unemployment crisis.
Figures available paint a dire situation of millions of adults and youths roaming the streets looking for job but finding none. Indeed, the National Bureau of Statistics (NBC) has reported a consistent pattern of the worsening situation of inflation and unemployment in the country. Perhaps more dangerous is the fact that about 60 per cent of that army of idle citizens is peopled by those between the ages of 15 and 35. Many of them, university graduates, are not only miserable but condemned to the street corner.
Nigeria’s inflation rate in July 2022 rose to a 17-year high of 19.64%. This compares to 18.6% recorded in the previous month of June 2022.
The latest inflation data is according to the recently released Consumer Price Index (CPI) report for July 2022, by the National Bureau of Statistics (NBS).
The last time Nigeria’s inflation was above 19.64% was in September 2005 when it rose to 24.32%. This is according to Nairalytics, a web portal that publishes Nigeria’s historical macroeconomic data. Notably, the uptick in the inflation rate was driven by increases in the food and core index.
Further breakdown of the report shows that the urban inflation rate rose by 2.08% to 20.09% in July 2022 from 18.01% recorded in July 2021, while the rural inflation rate hit 19.22% from 16.75% recorded in the corresponding period of 2021.
While the bumper sale of beer manufacturers in the first half of the year can be a source of joy to the board, management, staff, and shareholders of the affected companies, analysts said it will be counterproductive for the government to ignore the danger signal in the rising frustration of the Nigerian people.
The untamed security situation which makes farming and other productive ventures risky, and the rising cost of living, largely accentuated by the rising energy costs, according to observers, are driving many Nigerians, especially youths to crimes.
It is therefore hoped that government will not focus on the pool of funds made available through the increase in excise duty on beer products at the expense of well being of the generality of the people of Nigeria especially as the nation braces up for the next general election.
There is a need to put in place employment-generating ventures and end the controversial policy of fuel subsidy. The government also needs to actively engage the youths in farming, with its potential to check food scarcity and hunger. Analysts believe that with more transparency and deliberate efforts to curb waste, people will have more confidence in the government of the day.
