Why Nigeria Needs The Beverage Industry To Thrive Amid CETA Bill Furore

The Nigerian economy is currently navigating one of its most tumultuous periods in recent history.

With inflation eroding purchasing power and the cost of living skyrocketing, the resilience of the average Nigerian is being tested daily.

Yet, in this fragile economic climate, the debate surrounding the proposed amendment to the Customs and Excise Tariff (Consolidation) Act (CETA) has taken centre stage.

The bill, which is sponsored by Senator Ipalibo Harry Banigo, seeks to drastically increase the excise duty on Sugar-Sweetened Beverages (SSBs) from the current N10 per litre to a staggering N130 per litre (or a steep percentage-based levy). It is causing a furore that extends far beyond the boardrooms of manufacturing giants.

While the proponents of the bill cite public health benefits as a way to curb health concerns like obesity and diabetes, a deeper, fact-oriented look reveals that crippling the beverage industry at this critical juncture could sever one of the few remaining lifelines supporting Nigeria’s economic stability.

The amendment is framed as a public health intervention. Yet, the broader implications for jobs, small businesses, government revenue, and community development cannot be ignored.

Nigeria needs its beverage industry to thrive, not shrink under the weight of punitive taxation. The sector’s survival is critical to sustaining livelihoods, supporting small and medium enterprises (SMEs), generating revenue, and maintaining the social investments that beverage companies have consistently delivered to host communities.

To understand the gravity of the situation, we must look beyond the shelves of supermarkets and into the intricate web of the Nigerian economy.

The beverage sector is not merely a collection of factories producing soda; it is a massive economic engine. Industry data suggests that the non-alcoholic beverage sector supports over 1.5 million jobs. These are not just direct employees in manufacturing plants but a vast network of indirect beneficiaries.

We are talking about the farmers who supply raw materials like sugar, maize, and sorghum; the transporters who move goods across the 36 states; and the manufacturers of glass, plastic, and crown corks.

However, the most vulnerable group in this value chain is the Micro, Small, and Medium Enterprises (MSMEs). Visit any market in Lagos, Kano, or Onitsha, and you will see that the livelihood of the “Mama Put” food vendor, the roadside kiosk owner, and the petty trader is intrinsically tied to the sale of these beverages.

For many of these small business owners, soft drinks are high-turnover items that draw customers in and provide the daily cash flow necessary to keep their families afloat.

A price hike of the magnitude proposed by the CETA amendment, potentially increasing retail prices by over 50 per cent, would lead to a catastrophic drop in sales volume. Consumers, already grappling with inflation and reduced purchasing power, will cut back on purchases.

For companies, this means reduced production volumes, shrinking revenues, and the need to downsize operations. The ripple effect will be felt across the supply chain, leading to widespread job losses. When consumption contracts, it is these micro-entrepreneurs who suffer the immediate shock of reduced daily income, pushing them further into poverty.

In a country where unemployment remains a pressing challenge, the potential displacement of over 1 million workers becomes a looming social crisis.

Furthermore, the argument for the beverage industry’s survival is buttressed by its role as a consistent revenue generator for the government. According to reports, the industry generates over ₦1 trillion annually, making it a substantial contributor to the nation’s revenue.

Beverage firms remit substantial taxes: corporate income tax, VAT, and PAYE from employees topped N500 billion in recent fiscal years, per Federal Inland Revenue Service (FIRS) filings. Excise duties already contribute meaningfully, with SSBs accounting for a slice of the N1.2 trillion collected in 2024.

At a time when fiscal revenue is shrinking, the beverage sector contributes significantly through Value Added Tax (VAT), Company Income Tax (CIT), and the existing excise duties.

Ironically, while the proposed amendment is intended to boost government revenue, the opposite outcome is likely.

Escalation under the proposed CETA amendment could backfire. The relationship between tax rates and tax revenue is not linear; there is a tipping point, often referred to by economists as the “Laffer Curve”: where higher tax rates lead to lower total revenue because they strangle the taxable activity.

Therefore, by hiking the excise duty to N130 per litre, the government risks killing the goose that lays the golden egg. The proposed amendment, if it scales through would lead to an estimated price hike of 39 per cent in retail prices, a volume decline in sales of about 29 per cent and erosion of profit margins of beverage companies to an estimated 40 per cent.

So, if factories shut down or scale back production due to plummeted demand, the government loses not just the excise revenue, but also the pay-as-you-earn (PAYE) taxes from thousands of laid-off workers and the corporate taxes from profitable firms.

Historical precedents, like the 2021 tobacco tax hikes, show volume drops leading to revenue shortfalls. Also, Kenya’s soda tax saw a 17 per cent sales decline and flat proceeds. Nigeria’s fragile economy, battered by oil volatility and naira woes, needs reliable streams and not steep levies that stifle growth.

Beyond the cold hard numbers of GDP and tax receipts, we must also recognise the role of these companies as corporate citizens. The beverage industry in Nigeria has been at the forefront of Corporate Social Responsibility (CSR), filling gaps in social infrastructure that the government has struggled to bridge.

In the education sector, beverage companies have rehabilitated countless schools and provided scholarships to indigent students. In healthcare, they have donated equipment to hospitals and provided access to clean water in rural communities, ironically, solving some of the very health determinants that the tax proponents claim to care about.

These CSR activities are funded by profits, alleviate poverty, improve infrastructure and build goodwill, thereby fostering stability, particularly in volatile regions. So, if the industry is suffocated by draconian taxes, these social investments will invariably be the first casualties, leaving host communities to bear the brunt.

The beverage industry is a also driver of innovation, marketing, and logistics. For instance, the sector bolsters food security and exports. Thousands of local sugarcane farmers supply raw materials to bottling plants, whose workers then process tons daily. This agro-industrial linkage reduces import dependence, vital amid forex scarcity. Export potential grows too as Nigerian SSBs reach West African markets, earning dollars that ease balance-of-payments pressures.

Thriving firms innovate (with measures such as low-sugar variants and recycling drives), thereby addressing health critiques proactively. In addition, the industry supports ancillary industries such as packaging and advertising.

Critically, the proposed amendment also signals a worrying level of policy inconsistency. The Federal Government has spent years championing the Nigerian Sugar Master Plan (NSMP) to encourage backward integration and industrialization. To turn around and impose a strangulating tax on the primary off-takers of sugar contradicts the national industrial agenda. It sends a confusing signal to foreign direct investors who value regulatory stability above all else.

So, while critics argue health trumps economics, pointing to Nigeria’s rising non-communicable diseases (NCD) burden, and it is a fair point, but evidence favours balanced nudges over blunt taxes.

NCDs are complex and multifactorial; blaming them solely on carbonated drinks is an oversimplification that ignores other dietary and lifestyle factors.

Also, Nigeria’s context is unique. Unlike wealthier nations where this policy has been introduced and anti-SSB advocates allude to, Nigeria’s informal economy is vast, and its social safety nets are weak. A policy that jeopardises millions of jobs without adequate alternatives risks worsening poverty rather than improving health outcomes.

Apart from the significant loss of revenue for the government, the social impact of the amendment would be severe, with many families and communities relying on the industry for their livelihood.

Nigeria needs the beverage industry to thrive, not just for its economic contributions but also for its social development initiatives.

The CETA bill amendment, in its current aggressive form, threatens to dismantle this pillar of economic and national development. We must prioritise the survival of our industries to protect the millions of Nigerians who depend on this ecosystem.

With Nigeria’s GDP growth projected at around 3.5 per cent for 2025 by the International Monetary Fund (IMF), we need enablers, not saboteurs.

The National Assembly should reconsider this bill, engaging in robust dialogue with stakeholders to find a middle ground that preserves public health without sacrificing our economic future.

We must prioritise fiscal prudence by retaining current tariffs, incentivise reformulated products and scale public health via broader budgets. Let the beverage industry thrive as the economic engine it is. Our prosperity, and our people, depend on it.