Amid clampdown, Nigeria’s brewery sector generates $526m tax

Amid clampdown and destruction of beer bottles in some parts of the country, Nigeria’s brewery sector generated $526 million in taxes to the government in 2019, with trends showing additional revenue due to imposed excise duty on the sector.

SOURCE: Oxford Economics

Another increase to N35 per litre was implemented in June 2019. With another adjustment imminent, operators are already concerned about their survival, especially as inflation continues to take a chunk of individuals’ real incomes, limiting household spending.

Industry sources estimate the new excise on alcoholic beverages to hover around N50 per litre, representing over 40 per cent increase. At N50 per litre, the proposed increment is expected to impose an additional tax burden of between N10 billion to N30 billion in excise on companies that are already in a loss position.

While religious sentiments might have influenced the destruction of brewery products in some Northern parts of the country, the United Arab Emirates (UAE) has decriminalised alcohol consumption in a bid to attract tourists and foreign exchange inflow.

According to the latest report by Oxford Economics and commissioned by the Worldwide Brewing Alliance (WBA), the beer sector contributed 0.8 per cent of the GDP or $1 for every $131 of GDP generated in the global economies.

Unveiling the findings at a webinar on the global economic impact of the beer sector in 2019, titled: “Beer’s Global Economic Footprint”, the Chief Executive Officer, Oxford Economics, Adrian Cooper, who spoke on the ‘Global Footprint of the Beer Sector’, said the beer sector’s economic contribution to the global GDP was substantial in 2019, as the economic significance of the sector is larger in faster-growing economies, especially as it triggers substantial economic activity from agriculture to distribution, retail and hospitality.

The report noted that the economic significance of the beer sector is larger for lower-income countries, as the high-income countries’ beer sector contributed an average of 0.9 per cent to national GDP, while that of low-income economies is 1.6 per cent.

Similarly, the beer sector supports a proportionally larger number of jobs in lower-income countries than in high-income countries, which is 1.4 per cent to 1.1 per cent of national employment.

The report also observed that brewers stimulate exports in other countries and industries around the world. It observed that the beer sector contributes to the growth of other industries.

The report noted that the largest shares of international spending of the beer sector are received by firms in the manufacturing sector, which accounted for half of all exports, while non-beer food and drinks manufacturing, business services (like accounting, legal services, and marketing), and manufacturing of metal and mineral products, accounted for 20 per cent, 17 per cent and 16 per cent of exports respectively.

The new report further revealed that Africa, South Africa and Nigeria are among the countries with the highest return on investment for beer companies.

The report shows that South Africa records $5 billion in beer sales and ranks 19th among the countries with the highest markets for beer companies, while Nigeria spends over N947 billion and ranks 30th out of the 70 countries that controlled 89 per cent of global beer sales.

The United States leads the beer market followed by China and Germany with sales of $98.4 billion, $83.2 billion and $28.1 billion, respectively.

Cooper noted that a wide variety of firms benefited from brewers’ spending, as brewers spent $118 billion with their suppliers in 2019, with $8.9 billion spent on crops, hops and other products of the agricultural sector.

He said through this spending and that of downstream businesses and by employees, the beer sector supported $29 billion in GVA and 5.8 million jobs in the agricultural sector.

Other industries that benefit from brewers’ spending with suppliers, according to Cooper, include business services, metal products, transportation, storage, other food and drinks manufacturing, mineral product manufacturing, agriculture, forestry, paper products and printing, other manufacturing, utilities, machinery and equipment.

According to Cooper, beer’s downstream value chain boosts employment, adding that for every job at a brewer, there are a further 12 jobs in downstream activities.

He said in lower-middle-income countries, the overall employment supported by distributors, retailers and hospitality that sell beer represents 0.5 per cent of global employment.

President/ Chief Executive Officer, Worldwide Brewing Alliance (WBA), Justin Kissinger, said the brewery industry plays a positive role and contributes to the global economy.

He said brewing is a highly productive activity, with spillovers of human capital into the wider economy, as it underpins jobs and GDP throughout local communities both upstream and downstream.

Kissinge said, while the impact is large everywhere, it is greatest in lower-income countries where development is so important to rise incomes.

“The total global impact remains concentrated in local impacts at national level in each country. At the heart of this global impact are brewers themselves. When COVID-19 caused unprecedented disruption in the global economy, it became apparent how central we as brewers are to the success of our communities. We stepped forward to support a value chain running from agriculture and distribution to retail and hospitality that was disproportionately hurt by the restrictions the pandemic response required,” he stated.

He noted that the WBA represents 88 per cent of world beer production, with the brewing sectors in Nigeria, Australia, Brazil, Canada, Europe, Japan, Korea, Latin America, New Zealand, United Kingdom and the United States of America.