Alcohol manufacturers mull price increase as new excise tax takes effect

Alcohol manufacturers in the country are set to raise prices on their goods following the increase in excise duty by the Federal Government on the product which came into effect on Monday June 4, 2018.

According to a report on Friday by the Punch Newspaper, manufacturers said their price increase will take effect immediately and in tandem with the new excise duty regime ushered in by the government.

The Chief executive Officer of a wine manufacturing firm in Lagos, PEL Extract Limited, Mr. Kotey Linus, estimates that there will be over 15% increase in the price of wines.

Explaining further, the CEO said that a crate of wine from his firm which used to sell for ₦3,000 will now be sold for ₦3,500 following the new tariff increase on locally produced wines by the federal government.

The Group Chief Operating Officer, Sona Group of Companies, Mr. Ashok Manghnani, said that the firm was already looking at the new tariff structure to decide on new prices for its wines.

He explained that since the margin of sales was very small, the firm had no choice but to pass the cost to the final consumers, adding that there were efforts to ensure that the consumer is not overburdened.

Meanwhile, the Distillers and Blenders Association of Nigeria (DIBAN), the umbrella body for the alcoholic spirits industry has reportedly taken the matter to court.

Prior to the announcement of the new excise duty increase by the Minister of Finance, Mrs. Kemi Adeosun in March, the Association had gotten wind of the pending increase in February and wrote a letter to President Muhammadu Buhari, saying that the hike would threaten over ₦420bn worth of investments.

The letter further stated that the products by its members were largely consumed by the low-end and mainstream segment of the society and not a luxury item as claimed by the government. The letter further explained that any huge price adjustment on the products as a result of a hike in excise duties would lead to a drop in demand and staff lay-offs. The note went on to say that the industry contributes ₦60bn annually to the government’s coffers in the form of corporate tax and Value Added Tax (VAT), while employing 10,000 people directly and 15,000 indirectly.

The operators feared that the new excise duty regime will kill the wine and spirits sub-sector.

“Most locally produced brands are packed at about ₦250 per bottle and a massive increase in the excise duty, ranging from average of ₦142 to ₦175 per litre, is a decision to kill the industry. This will also put local manufacturers at a disadvantage against imported brands,” the association said.

It added that its members were operating with marginal gains and any increase in the form of excise duties would force them into a negative balance, leading to lay-offs and business failures.

They note that transferring costs to consumers whose purchasing power has been squeezed from inflation and unemployment will result in low demand for the product.

The Head, Economics and Statistics, manufacturers Association of Nigeria, Mr. Ambrose Oruche, said that manufacturers’ warehouses in the country were full of stocks of unsold goods due to low demand.

The Director-General, Lagos Chamber of Commerce and Industry, Mr. Muda Yusuf, said it was not the best time to impose excise duty on goods.

“If the government is trying to grow the local industry, imposing duties on locally manufactured goods is a contradiction of that objective. That is what we are saying about this drive to earn revenue. If the revenue drive is becoming too aggressive, it will negatively affect investment and the capacity of businesses to create jobs.

“The imposition of duties on these consumer goods will push up the cost of production and the prices of the items will be increased.

“These firms are already paying Corporate Tax, Withholding Tax, Education Tax and so many other taxes. Imposing excise duty on their products again will not be a good idea.”

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