The International Monetary Fund (IMF) has called on the Nigerian government to make an increase of 100 percent on excise duties on alcohol and tobacco.
This follows the recent the N1 excise duty approval given by President Muhammadu Buhari, which was announced on Sunday by the Minister of Finance, Mrs Kemi Adeosun.
The IMF stated that the current rate of 20 percent was low for alcoholic beverages as this does not account for the external costs that abusive drinkers impose on other people.
Th Fund emphasised that chronic heavy drinking has a harmful effect on the health system such as organ damage and birth defects. It also noted that studies have revealed that irresponsible drinking is one of the leading the causes of accidents and domestic violence citing the World Health Organisation evidence that excessive drinking results in 10 percent of the total disease burden.
“The duties on alcohol and alcohol beverages in Nigeria are low compared to those found in other countries. Excise duties of beer in Nigeria are 2/5 of the duty in Kenya and one and a half of the level in South Africa,” the Fund said in its report.
“The low tax level prevails even though Nigeria is the highest alcohol drinking country in Africa and leads the top 10 largest beer-drinking countries.”
For tobacco, the Fund said that there was a need for Nigeria to raise the excise duty on a stick cigarette to N5 as a fail-proof revenue raising strategy.
The newly approved rates for tobacco will see a N1 specific rate charged for a stick of cigarette (N20 per pack of 20 sticks) in 2018. The increase will take effect from June 4.
In 2019, each stick of cigarette will attract the sum of N2 specific rate (N40 per pack of 20 sticks), while in 2020, a N2.90k specific rate will be charged per stick (N58 per pack of 20 sticks).
But the Fund stated in the report that tobacco prices should be adjusted upwards in conformity with the global tobacco convention goal of achieving an excise burden of 64 percent of the retail price per pack of 20 cigarettes.
The IMF also recommended that excise duties should be converted from ad-Valorem to specific rates to reflect the external cost of consumption and production.
“Nigeria’s tobacco excise duties are very low at 16 percent of the retail price since excise duties are generally shifted forward into consumer prices; by extension, cigarette retail prices in Nigeria are only a fraction of the retail prices.
“To reflect the fact that tobacco excise is a proxy for the social cost that smokers impose on other people, it is recommended that the duty should be made specific and imposed at N100 per pack of cigarettes of 20 over a three-year period.”