Brewers groan under the weight of excise duty increase amid revenue and profit declines


Brewers in the country have called on the Federal Government to review its position on the excise duty increase that took effect in June 2018 as it is severely impacting their operations.

As quarterly results trickle in, one complaint has remained constant, the impact of the new excise duty on revenue and profits.

The new excise duty which came into effect on 4th June, 2018 to help boost the federal government coffers imposed an excise duty on beer and stout at .30 kobo per centilitre in 2018 and .35 kobo per cl each in 2019 and 2020. This translates to N30 per litre of beer in 2018 and N35 per litre in 2019 and 2020 respectively.

According to a recent report by the Nigerian Guardian Newspaper, Nigerian Breweries Plc paid N34bn in the last nine months (N25.8bn in 2018 and N8.1bn in Q1, 2019); International Breweries Plc paid, N1.53b as at September 2018; Champion Breweries, N311.3m as at December 2018; while Guinness Nigeria Plc has not revealed how much it paid, though the brewer lamented the impact of excise duty on its recently released Q1 results ending in September.

International Breweries Plc, the Nigerian subsidiary of Anheuser-Busch InBev set aside $18m for excise duty in 2018.

The Director, Legal and Corporate Affairs, International Breweries Plc, Michael Daramola, lamented that the new excise duty is killing the brewery industry.

He added that the country’s current economic situation does not support such increase.

Daramola who spoke to journalist during a recent tour of the company’s Gateway Brewery in Sagamu, Ogun State, decried that the increase of excise duty rates on alcohol beverages and tobacco is stifling the growth of the brewery industry in the country.

The Federal government last year increased the excise duty rates on alcoholic beverages and tobacco by 60 percent.

The Corporate Affairs Director said that some of the breweries in the country could not pass-off the cost to consumers due to the weak economy and the consumer that is already financially stressed.

“We fought against the government’s increment of excise duty but somewhere along the line, the government still went ahead to increase it.

“Excise is a tax that you pass on to the consumers; it is not an absorbable tax. But in the present economic situation of the country, we cannot pass that tax on to the consumers because the purse of the consumers is very lean and people are very price-sensitive, a slight change in price might make them reject the product.

“So we had to absorb the tax and that has really eaten into our bottom line. If you see the results of most of the breweries this year, you will found out that it has eaten far, far into it.”

“Our contention is this, what we are using to absorb that tax is what we should have used to do other things. We should use it to increase our capacity and employ more people but with the increment, we cannot do this, we have to hold on to our present capacity.”

He added that operators are still in discussion with the government because they learnt about moves to further increase the duty.

“Yes, we know that the government needs revenue but the way to increase revenue is growing. Increase the growth of the economy. When the economy is growing, you can increase the revenue but once you overcharge the people and stifle growth, you cannot have the desired result.

“But if there is growth in the economy, if people are setting up companies, then you will be taking your taxes easily”, he noted.

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