The prices of alcohol and cigarette would hit the roofs soon as President Muhammadu Buhari approved increase in excise duty rates on the products with effect from June 4, 2018.
He also granted a grace period of 90 days to all manufacturers before the commencement of the new excise duty regime.
The Minister of Finance, Mrs Kemi Adeosun, said on Sunday that the new rate on tobacco is 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.
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.
According to the minister of Finance, Mrs. Kemi Adeosun, “yor Tobacco, the government will maintain the current ad-valorem rate of 20 per cent 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 per cent ad-valorem rate, each stick of cigarette will attract a N1 specific rate per stick (N20 per pack of 20 sticks) in 2018, N2 specific rate per stick (N40 per pack of 20 sticks) in 2019 and N2.90k specific rate per stick (N58 per pack of 20 sticks) in 2020.
Adeosun further explained that Nigeria’s cumulative specific excise duty rate for tobacco was 23.2 per cent of the price of the most sold brand, as against 38.14 per cent in Algeria, 36.52 per cent in South Africa and 30 per cent in the Gambia.
The new specific excise duty rate for alcoholic beverages cuts across beer and stout, wines and spirits for the three years 2018 to 2020.
Under the new regime, beer and stout would attract N0.30k per centilitre (Cl) in 2018 and N0.35k per Cl each in 2019 and 2020.
Wines would attract N1.25k per Cl in 2018 and N1.50k per Cl each in 2019 and 2020, while N1.50k per Cl was approved for spirits in 2018, N1.75k per Cl in 2019 and N2.00k per Cl in 2020.
Adeosun, said on Sunday in Abuja, however, that there was no increase in excise duty of other locally excisable products.
She explained 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.
“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,” Adeosun said in a statement by her media aide Oluyinka Akintunde.
“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,” she added.
The Minister added that the new excise duty regimes are in line with the Economic Community of West African States (ECOWAS) directive on the harmonisation of member-states’ legislation on excise duties.
The ECOWAS Council of Ministers had during its 62nd and 79th Ordinary Sessions in Abuja in May 2009 and December 2017, respectively, issued directives on the harmonisation of the ECOWAS Member States’ Legislations on Excise Duties.
The directives seek to harmonise member-states’ legislation on excise duties of non-oil products and stipulate the scope of application, the rate of taxation, taxable event and amount.