Sugar tax detrimental to manufacturing sector, says Yusuf

The Chief Executive Officer, Center for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, yesterday described the proposition of a sugar-specific tax as “misplaced, economically risky and weakly supported by empirical evidence.”

According to him, the country’s economy remains in a delicate recovery phase, therefore, introducing additional sugar-specific taxes at this time risks reversing recent industrial gains, weakening employment outcomes and undermining the objectives of ongoing manufacturing-friendly fiscal reforms.

Yusuf  added that the proposition, if admitted, it is not adequately contextualised within Nigeria’s prevailing structural, social and macroeconomic realities because advocacy for sugar taxation in the country is largely driven by externally derived policy templates, particularly those associated with global health institutions.

The CCPE, an economic think-tank group, further argued that while public health challenges such as diabetes and cardiovascular diseases undoubtedly warrant urgent attention, it noted that global best practice does not support sugar taxation as a sustainable or standalone solution to non-communicable diseases—especially in economies characterised by high inflation, weak purchasing power, fragile industrial recovery, and widespread poverty, such as Nigeria.

“Public health objectives and economic growth are not mutually exclusive. What Nigeria requires is balanced, holistic and development-conscious policymaking, rather than additional fiscal pressure on one of the most important segments of the manufacturing sector.

“Nigeria’s food and beverage industry remains the largest and most dynamic segment of the manufacturing sector, with the non-alcoholic beverages sub-sector playing a particularly significant role,” Yusuf, said.

Citing data from the National Bureau of Statistics (NBS), Yusuf noted that the food and beverage industry contributes approximately 40 per cent of total manufacturing output, making it a critical driver of industrial growth, employment and value creation.

Beyond factory-level operations, Yusuf further argued, the sector sustains an extensive value chain that spans farmers, agro-input suppliers, processors, packaging companies, logistics providers, wholesalers, retailers and the hospitality industry.

Collectively, he said, these activities support millions of livelihoods nationwide, therefore any policy that undermines this sector carries wide-ranging economic consequences, including job losses, declining household incomes, reduced investment, and setbacks to poverty-reduction efforts.

“Manufacturers of non-alcoholic beverages are among the most heavily taxed and cost-pressured businesses in the Nigerian economy. Their existing fiscal obligations include30 per cent Company Income Tax; 7.5 per cent Value-Added Tax (VAT); ₦10 per litre excise duty; four per cent National Development Levy on assessable profits; four per cent Free On Board (FOB) levy on imported inputs; import duties of five per cent to 15 per cent on intermediate raw materials; 0.5 per cent ECOWAS levy; property taxes at sub-national levels; multiple state and local government levies, among others,” Yusuf listed.

He said these fiscal pressures are further compounded by Nigeria’s challenging operating environment, including high energy costs, prohibitive logistics expenses, exchange-rate volatility and elevated interest rates, with a resultant cumulative effect being rising production costs, shrinking margins, subdued investment appetite and higher consumer prices.

He noted that while taxation may marginally influence consumption patterns, it does not address the root causes of health issues, yet, the economic costs of additional taxation—higher consumer prices, reduced demand, job losses and weakened industrial investment—are immediate, tangible and potentially severe.

Advertisement