Sugar-Sweetened Beverage Tax risks further increasing production costs – LCCI

The Lagos Chamber of Commerce and Industry (LCCI) says the Sugar-Sweetened Beverage (SSB) Tax Bill currently passed by the Senate is additional taxes on an already challenged manufacturing sector.

LCCI acknowledged the government’s objective of addressing public health concerns associated with excessive sugar consumption, but expressed concerns about its potential economic consequences of imposing additional taxes, not only on the sector but the larger society.

The Chamber maintained that the introduction of additional taxes on the beverage industry risks further increasing production costs.

Dr. Chinyere Almona, LCCI Director General, said “the Lagos Chamber of Commerce and Industry has taken note of the passage of the Sugar-Sweetened Beverage (SSB) Tax Bill by the Senate. While we acknowledge the government’s objective of addressing public health concerns associated with excessive sugar consumption, we are concerned about the potential economic consequences of imposing additional taxes on an already challenged manufacturing sector.

“The Chamber recognizes the importance of promoting healthier lifestyles and reducing the incidence of non-communicable diseases. However, public health interventions must be carefully designed to achieve health outcomes without imposing disproportionate costs on businesses, consumers, and the broader economy.

“At a time when manufacturers are grappling with high energy costs, exchange rate volatility, elevated interest rates, logistics challenges, multiple taxation, and weak consumer purchasing power, the introduction of additional taxes on the beverage industry risks further increasing production costs. These higher costs are likely to be passed on to consumers through higher prices, worsening inflationary pressures, and reduced demand for locally manufactured products.

“The Chamber is particularly concerned that the tax could have unintended consequences across the industrial value chain. The beverage industry supports a wide network of suppliers, distributors, transport operators, retailers, farmers, and service providers. Any decline in production volumes resulting from increased taxation may negatively affect these interconnected sectors, leading to reduced investments, lower capacity utilization, and potential job losses.”

To reduce tax burdens on the manufacturing sector, the LCCI called for a more balanced approach that combines public health education, voluntary industry reformulation initiatives, improved product labeling, consumer awareness campaigns, and broader stakeholder engagement.

“Such measures can help achieve health objectives while minimizing adverse effects on industrial growth and employment, said Dr. Chinyere Almona.

Almona listed other factors in our the LCCI consideration thus:
Similar policies in more advanced economies were designed to encourage manufacturers to reformulate products by reducing sugar content.

We need to design Sugar-Sweetened Beverage taxes that will be part of a broader public health strategy and carefully calibrated to avoid excessive disruption to industry and employment.

We want to see manufacturers reformulate their products over a transition period rather than raise prices due to SSB taxes.

A reformulation-focused tax may be more effective than a revenue-focused tax. Incentivizing lower sugar content can achieve health objectives while preserving industrial activity.

Policymakers must carefully assess impacts on agriculture, manufacturing, and supply chains before implementation, especially where industries support large numbers of jobs.

“We urge the Federal Government and the National Assembly to undertake a redesign exercise through more technical engagement with manufacturers, health experts, organized private-sector groups, consumer associations, and other stakeholders to birth a tax policy that drives product reformulation that preserves sales and jobs. This will help ensure that public health objectives are pursued in a manner that preserves economic competitiveness, protects jobs, and supports sustainable industrial development,” the LCCI Director General submitted.