Food and Beverage Sector Suffers 4.05% Decline, Nine Months after Introduction of Excise Duty

Barely nine months after the federal government imposed an excise duty of N10 per litre on all non-alcoholic, carbonated and sweetened beverages in the country, the Food and Beverage Sub-Sector of the Nigerian industrial sector contracted by 4.05 per cent in the third quarter of 2022, which was its first contraction since the 2020 recession.

The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, had announced the introduction of excise duty on January 5, 2022, at the public presentation and breakdown of the 2022 budget.

Ahmed had explained that it was introduced in the Finance Act signed into law by President Muhammadu Buhari on Dec. 31, 2021, alongside the 2022 Appropriation Bill.

But the unintended consequence of the imposition of the excise tax has started to manifest with its first contraction since 2020.

A statement issued yesterday titled, “Comments on Quarterly GDP Growth for the Third Quarter of 2022” by the Centre for the Promotion of Private Enterprise (CPPE), noted that a matter, “of greater concern was the slump in the food and beverage sector, which contracted by 4.05 per cent. This is the first contraction of the sector since the recession of the second quarter of 2020.”

An Economist and the Chief Executive Officer of the CPPE, Dr. Muda Yusuf, said: “The food and beverage sector is the flagship of the Nigerian manufacturing sector for several decades and the toast of investors in the stock market.

“The sector contributed N2.2 trillion to GDP in the third quarter of 2022. This development is a reflection of a major setback for the Nigerian manufacturing sector which calls for an emergency response by the government.

“The plunge in the manufacturing sector performance has profound implications for food inflation, food security and employment. The food processing sector has the biggest impact on jobs because of the strong backward integration content and high multiplier effect in the agriculture value chain.”

Yusuf added that, “a striking feature of the GDP Q3 report was the contraction of the manufacturing sector, which shrunk by 1.91 per cent. This is the first quarterly contraction of the manufacturing sector since 2020 when the economy slipped into recession.”

He also identified sectors that have posted two consecutive quarters of negative GDP growth, which he described as, “segments of the economy that are experiencing much deeper crisis of recovery. They include: the crude oil and gas sector, oil refining, textiles and railways. These sectors are plagued by challenges of insecurity, wrong policy choices, structural impediments, plunge in productivity and corruption.”

Yusuf, who was the immediate past director general of the Lagos Chamber of Commerce and Industry, also called for reforms and intervention measures in order to fix the economy and address sectors that are either in recession, or have slowed and those that have contracted.

Some of the measures, according to him, included fixing the macroeconomic headwinds of high inflation and currency volatility, addressing the structural impediments to production and other economic activities and reforming the foreign exchange market to inspire investors’ confidence.

Other measured include addressing the challenges of insecurity and logistics and taking urgent steps to tame inflation and boost purchasing power of the citizens.

He also called for accelerating, “the implementation of the Petroleum Industry Act, and reforming the monetary policies to facilitate financial deepening in the economy as well as the provision of creative support for small businesses to promote economic inclusion.

He also called for acceleration of efforts to ensure domestic refining of petroleum products and fiscal reforms that would prioritise infrastructural development and transparency in the budgetary process.