The Nigerian Spirits and Wine industry, no doubt, is going through trying times. The imminent collapse of the industry is not all about the recession, but the coming into effect of a new tariff regime, which operators say is nothing but a deliberate attempt to cripple the industry in favour of imported products. David Audu in this report examines the issue and impact on the economy.
June 14, 2018//-A recent global forecast of wines and spirits market projected that the value may reach $1,122,578 million, and is expected to grow at 4.8 per cent by 2022.
Nigeria’s spirit market is worth $2 billion and also to grow at six per cent on average per year, according to a published report by the United States Department of Agriculture (USDA) in their Global Agricultural Information Network (GAIN).
Beside the expected growth in the coming years and the contribution of the sector to Nigeria’s GDP, the industry also employs over 25000 Nigerians with a multiplier effect of over 250,000 through the connected small businesses and retailers.
Sadly, however, these expected growth and the accruing job opportunities are about to go down the drain as a result of the new tariff regime on the products which comes into effect on June 1, 2018.
Recall that the Federal Government in March this year announced a new exercise and duty policy for tobacco and alcoholic beverages, including wine and spirit, which increased tariff to be paid on a liter from N30 to N150 in the first year and up to N200 subsequently.
According to the Distillers and Blenders Association of Nigeria (DIBAN), this translates from the current average duty of N270 per case in the first year to over N1, 350 from the second year. “This is an increase of over N500 per cent only on local wine and spirits”.
The association at a joint news conference recently with the Manufacturers Association of Nigeria (MAN) and the sector labour unions protested over the new excise duty and vowed to resist what they described as astronomical and insensitive hike in the excise duty that may put at risk investments worth over N420bn.
Though the stakeholders said they are not against the government’s effort to raise revenue, but that the excise duty increase was selective, too high and would hurt the economy, with high potential to lead to increased smuggling of foreign wines and spirits into the country.
Chief Patrick Anegbe, Chairman of DIBAN, addressing news ]men over the matter said the development will not only cripple their investments, but it will further compound the hardship of already impoverished Nigerians, adding that they would resist the new excise duty regime.
The group also alleged that the new tariff regime is an attempt by the Minister of Finance, Mrs Kemi Adeosun to foist an IMF agenda on Nigeria.
Anegbe, who is also the Managing Director of Intercontinental Distillers Limited, (IDL), one of the nation’s biggest producers of alcoholic spirits expressed concern that the new tariff increase would lead to the collapse of the local industry and pave way for the complete takeover of the wines and spirits market by imported and smuggled brands.
“We are also disturbed that the new hike will not only affect the Wines and Spirit industry but also other key sectors of the economy and businesses such as Packaging industries, Bottles, Cartons, Labels, Cork, Laminates, glue, Ink, Printing, laboratory, Marketing, Consulting, Media, to mention a few”.
“We are particularly worried that our industry investment of over N420 billion is being threatened by the recent upward review of Excise duties on locally produced Wines and Spirits. We strongly hold the view that if the intention of government is to grow local industries, imposing exorbitant duties on locally manufactured goods is a contradiction of that objective,” he said in a statement read to the media.
Anegbe further said that the excise duty hike will lead to many local manufacturers shutting down, giving room to fake and adulterated products.
On efforts to engage the government to soft pedal on the implementation pending when a ‘tariff with a human face will be reached by all stakeholder’ Anegbe, explained that when the association was informed of the imminent hike in tariff which was eventually announced by the Minister of Finance, Mrs. Kemi Adeosun in March, the Association wrote a letter to President Muhammadu Buhari to intervene and save thousands of jobs, but revealed that there was no positive response from the government.
He also alleged that the spirits and wine sector was marginalised when earlier negotiations were being carried out involving tobacco and the breweries sector. These two sectors only had marginal increase in their tariffs, leaving the spirits and wine to bear the brunt of the government new revenue generation drive.
Giving insight into the letter to the president, Anegbe said the letter detailed how 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.
He said the letter further explained why 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, and noted that the industry contributes N60bn 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 association also expressed their fears that the new excise duty regime will kill the wine and spirits sub-sector.
“Most locally produced brands are packed at about N250 per bottle and a massive increase in the excise duty, ranging from average ofN142 to N175 per litre, is a decision to kill the industry. This will also put local manufacturers at a disadvantage against imported brands,” the association said.
Also speaking on the matter, Mr. Segun Ajayi, Director-General, MAN, said that the timing of the Federal Government’s implementation of excise duty increase on wines and spirits was not well thought-out considering the economic hardship in the country.
“The rate is astronomical. This means that there will be 545 per cent on a product that is majorly consumed by the people at the low-end of the market. What you have is raising the hands of the foreign brands. We need to be very strategic because it is a trade issue.
“If you increase the excise duty because you want to guarantee the health safety of the consumers, you might be doing this in the other way round”.
Ajayi urged the Federal Government to reconsider its position, saying that the market place is a competition between foreign and local brands and that the consumers will bear the brunt at the long run.
Lending his voice for government to soft pedal on implementing the new tariff, Aare Fatai, managing director, Grand Oak Distilleries, said the argument for the increase should not be taken from a narrow moral perspective since it is about business which also involves people losing their investment and jobs. He said the current increase at about the heaviest and highest in Africa if not in the world.
Food, Beverages and tobacco, (FOBTOB) union have also vowed to put government to task until reasonable reversal is seen to be done.
Speaking to DAILY INDEPENDENT during the protest match by the union last week, Friday Izeghaigbe, FOBTOB chairman, IDL, said they will continue to press on with the demand for a reversal, noting that IDL as a market leader in the Nigeria’s wine and spirits have everything to lose should the new tariff continues.
“Our workers and their families are on the verge of being thrown into the hungry market. If government is not providing jobs for Nigerians why should they come up with policies that that will take away jobs?
“The interests government is trying to protect will be further worsened because smuggling will abound, and Nigerians will begin to consume unhealthy and unhygienic drinks they can lay their hands if the products are priced out of their reach. Nature never allows vacuum”, he stressed.
Also weighing on the tariff increase, Mr. Muda Yusuf, the Director-General, Lagos Chamber of Commerce and Industry, was quoted in a national daily recently as saying that 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.
Already manufacturers have stated a new pricing for their products.
Mr. Ashok Manghnani, the Group Chief Operating Officer, Sona Group of Companies, was quoted as saying that the firm was already looking at the new tariff structure to decide on new prices for its wines.
A critical look at the new tariff policy vis-à-vis what obtained before proves nothing contrary, rather, if anything at all, it is that government is set to cripple the industry and throw the Nigerian workers in those sector into the unemployment market. No doubt, Nigeria’s wine and spirit industry set to collapse if government fails to reverse the implementation of the new tariff policy.
By David Audu
This article was first published on independent.ng.
