New Excise Duty rates for alcohol, tobacco comes into effect

The Federal Government’s new excise duty rate on alcohol and tobacco came into effect on Monday, June 4, 2018.

Speaking in Abuja on Sunday, the Minister of Finance, Mrs Kemi Adeosun explained that the new excise duty rates which was first announced in March was spread over a three-year period from 2018 to 2020 in order to moderate the impact on prices of the products.

The minister further said that the 90-day grace period given by the president to all manufacturers before the commencement of the new excise duty regime ended on Sunday.

Adeosun stated that the new excise duty regime followed all-inclusive stakeholder engagements by the Tariff Technical Committee of the Federal Ministry of Finance with key industry stakeholders.

She noted that the upward review of the excise duty rates for alcoholic beverages and tobacco was to achieve a dual benefit of raising the government’s fiscal revenues and reducing the health hazards associated with tobacco-related diseases and alcohol abuse.

“The Tariff Technical Committee recommended the slight adjustment in the excise duty charges after cautious considerations of the government’s fiscal policy measures for 2018 and the reports of the World Bank and the International Monetary Fund’s Technical Assistance Mission on Nigeria’s fiscal policy.

“The effect of the excise duty rates adjustment on trade and investment was also assessed by the Federal Ministry of Industry, Trade and Investment, and it adopted the recommendations of the TTC.

“Furthermore, peer country comparisons were also carried out showing Nigeria as being behind the curve in the review of excise duty rates on alcoholic beverages and tobacco,” the minister said.

Following the President’s approval, Adeosun said that the new excise duty rate on tobacco was a combination of the existing ad-valorem-base rate and specific rates.

YEAR TOBACCO BEER WINE SPIRITS
Naira Per Stick Naira Per Cl Naira Per Cl Naira Per Cl
2018 Ad-Valorem rate of 20% + ₦1.00 specific rate per stick .30 Kobo ₦1.25 ₦1.50
2019 Ad-Valorem rate of 20% + ₦2.00 specific rate per stick .35 Kobo ₦1.50 ₦1.75
2020 Ad-Valorem rate of 20% + ₦2.90 specific rate per stick .35 Kobo ₦1.50 ₦2.00

“For Alcoholic Beverages, the current ad-valorem rate will be replaced with specific rates and spread over three years to moderate the impact on prices. This will curb the discretion in the Unit Cost Analysis (UCA) for determining the ad-valorem rate and prevent revenue leakages.

“The Government will maintain the current ad-valorem rate of 20% on tobacco and introduce additional specific rates with the implementation to be spread over a three-year period to also reasonably reduce the impact on prices.”

Under the newly approved excise duty rates for tobacco, she said in addition to the 20% ad-valorem rate, each stick of cigarette would attract a ₦1 specific rate (₦20 per pack of 20 sticks) in 2018; a ₦2 specific rate per stick (₦40 per pack of 20 sticks) in 2019 and a ₦2.90k specific rate per stick (₦58 per pack of 20 sticks) in 2020.

The minister explained that Nigeria’s cumulative specific excise duty rate for tobacco was 23.2 per cent of the price of the most sold brand, as against 38.14% in Algeria, 36.52% in South Africa and 30% in Gambia.

She added that the new excise duty regimes are in line with the Economic Community of West African States (ECOWAS) directive on the harmonisation of member-states’ legislations on excise duties.

It would be recalled that the ECOWAS Council of Ministers had at its 62nd and 79th Ordinary Sessions in Abuja in May 2009 and December 2017, respectively, issued directives on the harmonisation of the ECOWAS Member States’ Legislations on Excise Duties.

The directives seek to harmonise member-states’ legislations on excise duties of non-oil products and also stipulate the scope of application, rate of taxation, taxable event and amount.

There has been many groups including labour unions and a coalition of non-governmental organisations (NGOs) consisting of the Business Renaissance Group (BRG) and Sustained Development Collective (SDC) protest the increase as they claim it would lead to losses for businesses in the sector as well as retrenchment of workers.

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