By Ibrahim Sarafa
Any moment from now, you may have to pay an extra cost of N10 for every 1 litre of non-alcoholic, carbonated and sweetened beverages you consume. This is as the President Muhammadu Buhari administration introduced a ‘Sugar Tax’, which will take effect this year.
“This causes companies to pursue cost cutting measures to reduce the effect of diminishing revenue and profits by reducing employee salaries or retrenchment.”
Ahmed Zainab, the Minister of Finance, disclosed this on Wednesday in Abuja, explaining that the new policy derived its strength from the 2021 Finance Act signed into law by President Buhari on December 31, 2021. “There’s now an exercise duty of N10/per litre imposed on all non-alcoholic and sweetened beverages,” she noted, pointing out the basis as a way “to discourage excessive consumption of sugar in beverages which contributes to a number of health conditions including diabetes and obesity.”
Give it to Ahmed Zainab, she is good at making complex issue look so simple. While she was right that the N10 duty imposed on soft drinks will ‘discourage excessive consumption’, what she however missed or perhaps, failed to point out, was the bearing it will have on businesses. And that is where the jobs of a lot of Nigerians hang in the balance.
To have a grasp of what is about to unfold, take some time to go through the protest of the Manufacturing Association of Nigeria (MAN) on the new policy. Segun Ajayi-Kadir, the Director-General of MAN, explained that beverages contributed 38 percent of the manufacturing sector to Gross Domestic Product (GDP) and that it is responsible for more than 1.5million jobs.
This doesn’t look good and Ajayi-Kadir warned that the new tax regime will have an “unpleasant impact on employment, households and consumers,” noting that previous analysis showed that the exercise will affects production outputs, revenues and profits. “This causes companies to pursue cost cutting measures to reduce the effect of diminishing revenue and profits by reducing employee salaries or retrenchment,” he pointed out.
It is important to understand that the N10 exercise will be paid by consumers. Any tax hike or imposition of exercise on commodities will be shifted to the final consumers in the form of higher prices. When that happens, there is the tendency for demands to drop and the impact will seriously affect the capacity of companies to maintain their workforces.
And the implication is that many would lose their jobs. Increasing taxes or imposing exercises are the last thing Nigeria need at a time like this when we’re still struggling with one of the worst unemployment rate in the world. There is no doubt that government is facing serious revenue crisis and need to look for ways out, but that should not mean throwing Nigerians out of jobs or making it hard for companies to expand.
While N10/per litre exercise for soft drinks may not seem like a whole lot, cost of productions are already weighing on the manufacturing sectors and adding to that burden will only make things worse. Between 2015 and 2021, 10 companies in the food and beverages sector shutdown operations and 24 other companies in the industry carried out mass sack within the period under review. Comrade Quadri Olaleye, the President of Food Beverage and Tobacco Senior Staff Association (FOBTOB), blamed harsh working environment particularly, government policies, for the development.
If the new policy should go on, the impact will be far-reaching and better not imagined. Nearly a third of Nigerians are unemployed at the moment, and a government that is concerned about the people should be interested in policies that will help reduce the figure, not throw many others into the employment market. Because that is exactly what the new policy will do.
Creating jobs ought to be the priority of the Buhari administration considering the steady rise in unemployment figure in the past six years. We would be better off as a country getting abled and skilled citizens doing something productive than the possibility of some losing the few opportunities available to unwarranted policy.
Take aside, for the moment, the familiar arguments that creating jobs bear on economic growths of a country, we must understand, especially with our experience over the years, that unemployment is a major driver of insecurity and instability. People finding it hard to apply their skills or knowledge legitimately and provide for their families makes them an easy target for recruitments into criminality and other acts that threatens peace and social stability.
“We would be better off as a country getting abled and skilled citizens doing something productive than the possibility of some losing the few opportunities available to unwarranted policy.”
The point is not that government should not strive to improve capacity for revenue generation or take initiatives to protect the health of citizens but question on what happens to the jobs of Nigerians should top every other considerations.
High taxes or exercise will always weigh on demands for a product, and the implication is a reduced earnings for affected sector, which will be forced to transfer this burden on workers, either through slash in renumerations or outright sack of workers. That is why I’m afraid that the impose of N10/per litre exercise on soft drinks pose a threat on the jobs of many Nigerians.
Ibrahim Sarafa is a journalist with Sahel Standard Newspaper and writes from Osun state. He can be reached through his email: email@example.com or Twitter: @SarafaNgr