Nigeria raises excise duties on wine, beer and spirits

Nigerian president Muhammadu Buhari has confirmed an increase in excise duty on both tobacco and alcohol, as global beer giant ABInBev moves closer toward the opening of a $250 million brewery in the west African country.

Taking effect from 4 June, the amendment to excise duty rates will see producers of tobacco subjected to a 20% tax, as well as an additional “per stick” charge. For alcohol, the standard 20% rate has been replaced by a tax per centilitre, set at specific rates for beer, wine and spirits. Overall, beer will see the smallest levy, followed by wine and spirits.

The increased tax will be introduced over a three year period to 2020, the country’s minister of finance Kemi Adeosun, said in a statement on Sunday, to moderate the impact on prices of the products.

Under the new regime, beer and stout will attract a N0.30k (£0.0006) per centilitre (cl) charge in 2018 and N0.35k (£0.0007) per Cl each in 2019 and 2020.

Wines will attract a charge of N1.25k (£0.0025) per cl in 2018 and N1.50k (£0.003) per cl each in 2019 and 2020, while N1.50k (£0.003) per cl was approved for spirits in 2018, N1.75k (£0.0035) per cl in 2019 and N2.00k (£0.0040) per cl in 2020.

The minister said the move would have a “a dual benefit of raising the government’s fiscal revenues and reducing the health hazards associated with tobacco-related diseases and alcohol abuse”.

The president granted a grace period of 90 days (three months) to all manufacturers before the commencement of the new excise duty regime on 4 June.

It follows a turbulent period for the west African country, which saw it fall into recession in 2016 due to falling oil prices, which later rallied to lift the country out of recession last year. As such, the country is continuing to put strategies in place to help it raise revenues from non-oil products.

GLOBAL INVESTMENT

Beer is one area that the country is faring particularly well in, with the country’s young and urbanised population driving growth of beer brands attracting investment from big global brewers including ABInBev and Heineken. Nigeria, already a strong market for Diageo’s Guinness brand, was estimated to be worth US$2.7 billion at the end of 2016 by Euromonitor International.

Last year ABInBev announced that it was investing $250m in its fourth brewery in Nigeria, with the launch of its leading brand, Budwesier. The brewery will be the biggest in its portfolio outside of South Africa, and will merge its three subsidiaries (acquired during its takeover of SAB Miller) – International Breweries, Pabod Breweries and Intafact Breweries – into one.

The merger, which began in June end is due to be complete by the end of the year, will leave just one entity in the end, which will be known as International Breweries under managing director Annabelle Degroot.

Overall, Africa’s beer market, which is currently the world’s fastest-growing, is estimated to be worth some $13billion.