• Diabetes Patients Seek Increased Tax As Manufacturers Push For Suspension
Recently, the Federal Government mooted the idea of stopping collection of N10 Sugar Tax. And there was uproar as many Nigerians rejected the idea, arguing it would be a reversal of the gains in the battle against diabetes in Nigeria. In this report, Assistant News Editor, Weekend, GBENGA SALAU, examines the impact of this on the management of diabetes among other related issues two years after Federal Government activated its collection.
Two years after Federal Government activated the implementation of compulsory N10 per litre on sugar-sweetened beverages by manufacturers, campaign to reverse this policy as a way to cushion effect of the harsh economy on businesses provoked heated debate recently, bringing back the contention that followed the introduction of the Sugar-Sweetened Beverages (SSB) Tax.
The scenario has created two sharp camps: while stakeholders, especially diabetes patients, kicked against government’s new stance, demanding hike in the tax to 20 per cent, the manufacturers stood solidly behind the suspension, canvassing aggressively for its discontinuation.
According to the patients, new song from the government about the sugar tax will be a setback to the gains recorded in tackling diabetes and other related diseases, as it may increase the prevalence and that of other non-communicable diseases in Nigeria for which the SSB tax was introduced.
The World Health Organisation (WHO) said that about 422 million people worldwide have diabetes, the majority living in low-and middle-income countries, and 1.5 million deaths are directly attributed to diabetes each year.
It added that both the number of cases and the prevalence of diabetes have been steadily increasing over the past few decades. This is just as the Diabetes Association of Nigeria (DAN) estimated that about 11.2 million Nigerians are living with diabetes, and over 90 per cent of them have type 2 diabetes.
Similarly, a 2021 epidemiological data by ‘Our World In Data’, said Nigeria has 3.60 per cent diabetes prevalence, making it the 37th highest in Africa, ahead of 17 countries, including Gambia and Benin, with 1.90 and 1.10 per cent prevalence respectively.
But WHO, in November 2022, estimates the prevalence of diabetes in Nigeria to be 4.3 per cent owing largely to lifestyle changes caused by urbanisation and its results; industries producing unhealthy diets including sugar-sweetened drinks, lack of exercise, tobacco use and harmful use of alcohol.
Recall that to check the prevalence of diabetes and other related diseases from sugar-sweetened beverages, the Federal Government; through the Finance Act, which President Muhammadu Buhari signed into law on December 31, 2021, provided for the payment of N10 per litre on every sugar sweetened beverage.
Surprisingly, it was while stakeholders were demanding an increase in the N10 per litre of SSB that the government of President Bola Tinubu talked about suspending the tax.
Commenting on government’s new position on SSB Tax, Senior Programme Manager, Food Justice Programme, Corporate Accountability And Public Participation Africa (CAPPA), Abayomi Sarumi, said the planned suspension is not only ill-advised but also a clear demonstration of SSB industries’ sole focus on profit over the health of their consumers, the targeted Nigerians.
“This will reverse the gains the country has made in the public health sector since the introduction of the SSB Tax. The government must not only retain the tax, but there must also be a significant increase in the SSB Tax, passed through to consumers, with effective governance structure, and accountability.
“The SSB Tax, which was introduced in 2021, is not just another tax to rake in money for the government. It is a tax to nudge Nigerians towards a change in behaviour with respect to the unhealthy consumption of SSBs, which have no nutritional value to the body.”
Also commenting, Olufemi Adetola Fasanmade, a Professor of Medicine at the University of Lagos, said if the tax is stopped, soft drinks would become cheaper and more people will have access to the drinks leading to weight gain and high chances of developing diabetes. Ironically, Nigeria is not the first country to introduce the SSB Tax and many of the countries imposed a higher tax compared to that of Nigeria.
WHO disclosed that 108 countries globally impose some sort of tax on sugar-sweetened beverage. The Guardian gathered that there are about five countries in Africa that have introduced an SSB tax.
With two years gone into collection of SSB tax, has there been any impact in checking the prevalence of diabetes in Nigeria?
Fasanmade said there has been no definitive evidence of the benefit of the sugar tax in Nigeria because the prevalence of obesity and diabetes does not seem to be reducing. He also said that the proceeds from the tax collection were supposed to fund healthcare but there is no evidence to confirm if it is being done.
On his part, Sarumi said the N10 per litre tax has been insignificant in that SSBs producers absorb it rather than pass it on to the consumers. He added that when the tax was introduced, the price of an average SSB was N150.
“Currently, SSBs are sold for N400, depending on the brand, yet the tax is still the same N10. This means that the industry continues to make more profit at the detriment of the people, including people living with diabetes and other non-communicable diseases (NCDs) that are diet-related. We recognise all the gaps that were in the 2021 legislation, and this is why we have sustained efforts to get the government to increase the tax and earmark it for public health.
“Nigeria currently spends a little about five per cent of its budget on health, whereas the African Union (AU) member states agreed to allocate at least 15 per cent of their budgets to health in the 2021 Abuja Declaration. More so, over 70 per cent of Nigerians spend out-of-pocket on health expenditures. For example, if the tax is moved to around N30/litre, the government will earn more than N700 billion and will save over N3.5 trillion in costs related to diabetes, obesity and other NCDs.
“This impact will be measured beyond treatment of diabetes but in terms of productive hours gained, disability-adjusted life years (DALYs), social gains, and improved health outcomes. To achieve this, we must have a proper governance structure like we are advocating for and a higher tax for a period.”
In Sarumi’s words, SSB Tax is not a tax on sugar, and not one that should be channeled to the treatment of diabetes only. He added that the SSB Tax targets what people call soft drinks, energy drinks, sports drinks, and other drinks in that category that people consume owing to a gap in knowledge, especially the hard-hitting impacts of this consumption.
“An average bottle of SSBs contains 14 cubes of sugars, which are more than the daily recommended limit and we find that many people take more than one at a go. This is the primary rationale for instituting a tax on SSB in Nigeria and globally.
“However, the SSB Tax was instituted in 2021 through the Finance Act and collection did not start until July 2022, which means this has only been collected for two years. Unfortunately, the tax is collected by the Nigeria Customs Service (NCS) and goes directly into the federation’s pocket. Part of our engagement as the National Sugar-Sweetened Beverages Tax Coalition is to demand accountability and to do this; we have invoked the Freedom of Information (FOI) Act to ask the NCS for a breakdown of what they have collected since the first day.”
On the challenge of tackling and treating diabetes in Nigeria, Sarumi argued that they are the same with all forms of Non-Communicable Diseases. He identified cost of buying drugs, hospital bills, lack of access to healthy food, and the urbanisation of diets.
“We are witnessing a surge in dietary patterns, which has coincided with urban transitioning and normalisation of unhealthy food as a lifestyle pattern. To tackle the burgeoning burden of diet-related diseases and NCDs in general, the government must have holistic policies in place.
“SSB Tax must be significant and earmarked for health, the NAFDAC regulations on trans-fat in processed foods and cooking oils must be effectively implemented, and the government must have a mandatory salt limit in place to shield Nigerians from the impact of High Sugar, Trans Fat and High Salt. The cost of pharmaceuticals must also be addressed with the government increasing allocation to health in line with the Abuja Declaration.”
As the debate on whether to continue or stop the collection of sugar tax continues, will the imposition of tax on sugar sweetened beverages help reduce its consumption, a Clinical Nutritionist, Funmilola Ijiwola, said that the imposition of tax on soft drinks cannot achieve much result because the consumption is based on availability, choice, and marketing that appeal to the psychology and desire of the citizens.
“Every citizen still sees the soft drink as a way of celebration, given as gifts, served with every meal. Despite the increase in price, the consumption is still high.”
She noted that the sugar tax had not really achieved the desired result, stating: “The incidence of Diabetes is on the increase using the Lagos State Hospital as a case study. And unfortunately, diabetes is occurring in young adults now instead of the older citizens.”
On better ways to make Nigerians consume less of sugarcoated beverages compared to the tax imposed on manufacturers, Ijiwola suggested nutrition education for citizen on power of making healthy choice and demanding for healthy choice. “This will definitely affect the composition of the product.”
She also suggested making healthy alternatives drink more easily affordable and accessible while marketing and advert on the health implications of the consumption of high sugar drinks and beverages through the research and data.
Business owners especially those producing Sugar-Sweetened Beverages kicked against the introduction of the sugar tax and the campaign has been sustained till date, especially the call for an increase in the tax.
The Manufacturers Association of Nigeria (MAN) argued that the tax would hurt their operations and have negative implications on their businesses as well as cause unemployment to rise.
Stakeholders in the manufacturing sector said that the FG has not stopped the collection of sugar tax from beverage manufacturers, as this was not the request made by the association on behalf of the beverage manufacturers.
It was, however, learnt that MAN has accepted the tax’s introduction, but kicked against an increase or upward review. It agreed on sustenance of the existing roadmap on sugar tax from 2022 to 2025 for the stabilisation of the beverage industry.
A World Bank report disagrees with the positions of business concerns saying: “emerging evidence from independent evaluation and modelling studies consistently identifies net positive economic impacts from SSB taxes, including overall employment and productivity gains, and increased government spending from additional revenue.”
But a report on Non-Alcoholic Drink Sector in Nigeria by PwC sighted by The Guardian provided some insights about the implication of the sugar tax on the sector. In sum, the sector is demanding sensitising the public on healthy lifestyle, as it will work better to help control the risk of diabetes and other non-communicable diseases. “If the right and healthy lifestyle is enthroned and maintained, there will be a significant reduction in the risk of diabetes and non-communicable diseases,” the report stated.
The report also argued that increasing taxes in spite of the country’s macro-environment is detrimental and could result in a sharp decline in its contribution to Gross Domestic Product (GDP), loss of jobs and total tax payable to the government.
“Without a stabilisation period to facilitate recovery, these challenges are likely to translate into direct and indirect job losses within the sector. Where compounded by tax increases, our estimation suggests a staggering 6.6 million Nigerians could be directly and indirectly impacted through a loss of livelihood.
“The combined effect of the rise in inflation and interest rates as well as naira depreciation as at end of February, led to a significant decline of 57 per cent in the gross profit margin of the players in non-alcoholic drinks industry, in the last one year. The industry is estimated to experience a decline in revenue by 17 per cent and 23 per cent in 2023 and 2024 respectively.”
The report further said that Nigeria does not have a sugar problem because with a per capita consumption of sugar of 8.3kg as at 2022, Nigerians consume less sugar than the WHO prescribed threshold of 9.1kg per capita and that at 8.3kg sugar consumption, Nigeria is one of the lowest consumers of sugar in Africa.
It added that taxing one narrow product category of sugar users while trying to incentivise sugar production appears inequitable and can signal inconsistent policy direction.
“The average Nigerian spends a mere 1.4 per cent of monthly expenditure on beverages. As of 2020, the NBS reported that the average Nigerian spends only about 1.4 per cent of total expenditure monthly on non-alcoholic beverages. This intake translates to a marginal 5.1 per cent of entire sugar consumed and 2.4 per cent caloric intake.”
Weighing on the proposed increase of SSB tax, the report said is discriminatory, as sugar-sweetened beverages contribute to only 5.1 per cent of total sugar consumption of households in Nigeria.
“The overconsumptions of other food items, high intake of salts, fatty foods as well as the absence of balanced lifestyle have also been linked as contributors to obesity and type-2 diabetes.”
The sub-sector, in the report, therefore, requested retention of existing rates till June 2026, as this is in recognition of the delicate balance needed to support economic growth.
Commending on the implication of raising the tax higher, it said: “An additional tax increase under the current economic circumstances would not only adversely impact non-alcoholic drink producers but also impede the industry’s potential for expansion, and trigger an overall economic decline.
“Moreover, the industry is already at its optimal tax bracket at about 40-45 per cent of its gross profit. Our analysis indicates that compounding the pressure of the macroeconomic headwinds with tax increases may result in a decrease of about 20 per cent of the local value chain (employees, distributors, suppliers, nano and micro retailers).
“This could potentially impact the livelihood of an estimated 6.6 million Nigerians. Direct employment is also estimated to reduce by 12.52 per cent in 2024, further plunging more Nigerians into poverty. A review of various jurisdictions reveals that discriminatory tax on soft drinks does not reduce non-communicable diseases. There is no evidence that taxation of soft drinks has reduced overweight, obesity or non-communicable diseases (NCDs).
“Overweight and obesity are complex issues with multifactorial causes that require involvement of different stakeholders and their mutual multilevel work: governments, industry, healthcare and civil society.
“Contrary to expectations, global experiences in countries with implemented soft drinks taxes, show persistent obesity challenges. The gross margin for NADS industry is projected to decline to nine per cent in 2024 due to the ongoing macroeconomic headwinds. Purchasing power of consumers declined by 23 per cent, between 2021 and February 2024 due to the inflationary pressure, meaning consumers can buy fewer goods with the same amount of money.”
The report further said the non-alcoholic beverage industry experienced decline in revenue by 17 per cent and 23 per cent from N1.23 trillion in 2022 to N1.02 trillion in 2023 and N0.95 trillion in 2024 respectively.
“The cost of sales and cost of raw materials of the players increased by 78 per cent and 30 per cent respectively because of inflationary pressure and naira depreciation.
“The rise in interest rates has led to increase in cost of domestic loan by 9.8 per cent and 35.7 per cent for foreign loan. The combined effect of the rise in inflation and interest rates as well as naira depreciation led to a significant decline of 57 per cent in the last one year, in the gross margin of the players in non-alcoholic drinks industry in Nigeria.”
Also commenting, the Director General of the Lagos Chamber of Commerce and Industries (LCCI), Dr Chinyere Almona, said the suspension of sugar tax on SSBs, which was initially introduced as part of the 2021 Finance Act, was a response to concerns from manufacturers and industry stakeholders who argued that the tax was putting financial strain on businesses.
She noted that if the tax is suspended or discontinued, for manufacturers, it offers relief from the financial burden, potentially reducing the prices of soft drinks.
“This could also help stabilise the industry, preserve jobs, and support the overall economy by reducing production costs for beverage companies.” She said sugar tax has been criticised for increasing production costs and reducing profit margins for beverage manufacturers, which has led to higher prices for consumers and could have resulted in reduced consumption, which might affect the profitability of the companies and possibly lead to job losses.
Almona also could not provide a figure on what has been generated or paid by businesses as sugar tax. The Vice Chairman, Diabetes Association of Nigeria and Co-Chair, National Action on Sugar Reduction Coalition, Comrade Bernard Enyia, said the suspension of the sugar tax for six months is not a bad idea only if the government will return the deduction.
Speaking on whether what has been collected as sugar tax has been rightly deployed, he said there has not been any impact of the sugar tax in tackling diabetes and other non-communicable diseases.
He, however, attributed the failure of sugar tax to make impact in tackling non-communicable diseases including diabetes to not channeling the revenue collected from the tax into a dedicated intervention fund account, which would have been easier to deploy the fund for what is meant for. He disclosed that the next line of action is for stakeholders to lobby to get a legislation to ensure that whatever money generated through the sugar tax is used for tackling non-communicable diseases including diabetes.
On the challenges that people living with diabetes are grappling with, Enyia said aside from that, government has not paid enough attention to non-communicable diseases, which affects budgetary provisions, diabetes drugs are very expensive.
He added that the soaring prices of items in Nigeria have compounded the crisis for diabetics’ patients, disclosing that the price of insulin has gone up by over 400 per cent.
“There is a syringe, which is used to administer the injection. That syringe used to be N13 but now sold for N600. And I take injections in the morning and evening, so, I use two syringes daily for 30 days. You know the cost implication of that.” He wondered how many Nigerians who are diabetic can afford to buy the drugs daily, which often compound their health challenge if they do not take their drugs daily. He added that there is a dearth of medical officers to cater for the large population of diabetic patients in Nigeria.
Attempts to get the Federal Ministry of Health to give insight on what has been collected and the impact of the fund in managing non-communicable diseases including diabetes did not yield result.
The Guardian contacted the Director, Public Affairs of the ministry who asked that the questions be sent to him which was complied with. He, however, did not provide any response despite the questions were sent over three weeks ago. Whenever he was contacted, he always promised to get the appropriate details to the questions from the Director, Public Health in the ministry.
