Alcohol, Tobacco Prices To Rise As FG Increases Excise Duty

Amended excise duty rates

Prices of alcoholic beverages and tobacco will soon go up as the federal government announced new excise duty for the products with effect from Monday, June 4, 2018.

Daily Trust report continues:

The new rates approved by President Muhammadu Buhari have also granted a grace period of 90 days (three months) to all manufacturers before the commencement of the new excise duty regime.

There is however no increase in excise duty of other locally excisable products.

Minister of Finance, Mrs. Kemi Adeosun, who made this known on Sunday in Abuja, stated that the new excise duty rates were spread over a three-year period from 2018 to 2020 in order to moderate the impact on prices of the products.

The Minister disclosed that the new excise duty regimes followed all-inclusive stakeholder engagements by the Tariff Technical Committee of the Federal Ministry of Finance with key industry stakeholders.

According to her, the upward review of the excise duty rates for alcoholic beverages and tobacco was to achieve a dual benefit of raising the Government’s fiscal revenues and reducing the health hazards associated with tobacco-related diseases and alcohol abuse.

She said, “The Tariff Technical Committee (TCC) recommended the slight adjustment in the excise duty charges after cautious considerations of the Government’s Fiscal Policy Measures for 2018 and the reports of the World Bank and the International Monetary Fund Technical Assistance Mission on Nigeria’s Fiscal Policy.

“The effect of the excise duty rates adjustment on trade and investment was also assessed by the Federal Ministry of Trade and Investment and it adopted the recommendations of the TTC. 

“Furthermore, peer country comparisons were also carried out showing Nigeria as being behind the curve in the review of excise duty rates on alcoholic beverages and tobacco.”

Following the President’s approval, Adeosun disclosed that the new excise duty rate on tobacco was now a combination of the existing ad-valorem base rate and specific rate while the ad-valorem rate was replaced with a specific rate for alcoholic beverages.

The Minister added, “For Alcoholic Beverages, the current ad-valorem rate will be replaced with specific rates and spread over three years to moderate the impact on prices. This will curb the discretion in the Unit Cost Analysis (UCA) for determining the ad-valorem rate and prevent revenue leakages. 

“For Tobacco, the Government will maintain the current ad-valorem rate of 20% and introduce additional specific rates with the implementation to be spread over a three-year period to also reasonably reduce the impact on prices.”

Under the newly approved excise duty rates for tobacco in addition to the 20% ad-valorem rate, each stick of cigarette will attract a ₦1 specific rate per stick (₦20 per pack of 20 sticks) in 2018, ₦2 specific rate per stick (₦40 per pack of 20 sticks) in 2019 and ₦2.90k specific rate per stick (₦58 per pack of 20 sticks) in 2020.

The Minister explained that Nigeria’s cumulative specific excise duty rate for tobacco was 23.2% of the price of the most sold brand, as against 38.14% in Algeria, 36.52% in South Africa and 30% in Gambia.

The new specific excise duty rate for alcoholic beverages cuts across Beer & Stout, Wines and Spirits for the three years 2018 to 2020.

Under the new regime, Beer & Stout would attract ₦0.30k per centiliter (Cl) in 2018 and ₦0.35k per Cl each in 2019 and 2020.

Wines would attract ₦1.25k per Cl in 2018 and ₦1.50k per Cl each in 2019 and 2020, while ₦1.50k per Cl was approved for Spirits in 2018, ₦1.75k per Cl in 2019 and ₦2.00k per Cl in 2020.

The Minister added that the new excise duty regimes are in line with the Economic Community of West African States (ECOWAS) directive on the harmonization of member-states’ legislation on excise duties.