Brewers decry effects of excise duty on operations

With brewing firms unable to pass on rising costs to consumers, they have called on the Federal Government to review its position on excise duty as operators continue to cave under the pressure of increased duty.

The Federal Government had introduced a new excise regime on 4 June 2018 to address shortfalls in revenue and this new regime led to an increase of at least N30 per litre of alcohol consumed in the country.

The effect of another increase will lead to a rise in the rate from the N30 per litre introduced in 2018 to N35 per litre, if reviewed by the government.

Based on the financial results obtained by The Guardian, Nigerian Breweries paid about N34 billion within the last nine months (N25.8b in 2018 and N8.1b in Q1, 2019); International Breweries, N1.53b as at September 2018; Champion Breweries, N311.3m as at December 2018; while Guinness Nigeria Plc that controls the second largest market share did not reveal how much it paid, even though industry sources put its duty at almost par with Nigerian Breweries.

For the new entrant into the Nigerian market, Anheuser-Busch InBev, a total of $18 million was earmarked for excise duty for 2018, as it noted in its Q1 2019 report that Nigeria continues to lead the way with revenue per hectolitre expansion and continued double-digit volume growth fuelled by the core portfolio as well as Budweiser in the premium segment.

The Director, Legal and Corporate Affairs, International Breweries, a subsidiary of AbinBev Group, Michael Daramola lamented that the increment of excise duty rates on alcohol beverages and tobacco by the Federal government is killing the brewery industry.

In Daramola’s view, the current economic situation in the country could not support such increment.

Daramola who spoke to journalists during a facility tour of of the Ogun State plant of the International Breweries Plc, lamented 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.

According to Daramola, some of the breweries in the country had to absorb the excise tax in order not to further stressed the consumers who he said already have lean purses.

His words: “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.