From N10 to N130? What Nigeria’s Proposed Sugar Tax Increase Means for Drinks, Health, and Jobs
Nigeria introduced a tax on sugar-sweetened beverages (SSBs) through the Finance Act of 2021, placing an excise duty of N10 per litre on non-alcoholic drinks that contain added sugar. The government framed the measure as a dual-purpose policy: discouraging excessive intake of sugary drinks in order to curb non-communicable diseases (NCDs) such as obesity and diabetes, while also generating additional funds for public health needs.
Since its implementation, the SSB tax has sparked sustained debate among lawmakers, public health advocates, civil society organisations, and industry representatives. This debate has intensified following recent public hearings in the National Assembly on proposals to raise the levy sharply to N130 per litre.
Source: UGC
Supporters of the increase argue that such a jump would bring Nigeria closer to World Health Organisation (WHO) guidance, which suggests that health taxes should be high enough to raise prices by 20–50% to significantly reduce consumption.
The discussion below examines the implications of this evolving tax regime for consumers and for beverage producers.
Effects of the Sugar-Sweetened Beverage Tax on Consumers
1. Rising Prices at the Point of Purchase
The most immediate consequence for consumers is an increase in retail prices. Even the current N10 per litre tax adds to production costs, which manufacturers often transfer to buyers through higher shelf prices.
If the proposed N130 per litre rate is adopted, prices of carbonated drinks, energy drinks, and sweetened juices could rise substantially—potentially within the 20–50% range—placing these products further out of reach for many households.
This impact is especially significant for low- and middle-income consumers, who already devote a higher proportion of their income to food and beverages. In the context of inflation and declining purchasing power, higher drink prices may further strain household budgets.
While policymakers view this price effect as a tool to discourage unhealthy consumption, critics argue that without accessible and affordable healthier alternatives, the tax mainly increases costs rather than improving nutrition.
2. Health Outcomes and Consumption Behaviour
Public officials have consistently justified the SSB tax as a preventive health measure, maintaining that reduced consumption of sugary drinks will help lower rates of tooth decay, obesity, type-2 diabetes, cardiovascular disease, and other NCDs over time. International evidence supports the idea that sufficiently high and sustained sugar taxes can reduce sugar intake.
However, several analysts have noted that Nigeria’s current tax level is too low to meaningfully influence consumer behaviour. Because the levy has not significantly altered retail prices, purchasing habits appear largely unchanged, and there is little evidence so far that the policy has led to measurable reductions in sugar consumption or NCD prevalence.
3. Distributional and Equity Concerns
Another major concern is the regressive nature of the tax. Since sugar-sweetened beverages are relatively cheap and widely consumed, the burden of the tax falls more heavily on lower-income groups. Without policies that encourage or subsidise healthier substitutes, the tax may simply reduce disposable income rather than promote better dietary choices.
Some advocates have suggested directing SSB tax revenues toward nutrition education or subsidies for healthy foods, but such measures have yet to be formally integrated into the policy framework.
Effects of the Sugar-Sweetened Beverage Tax on Beverage Companies
1. Cost Pressures and Profitability
For beverage manufacturers, excise duties directly increase production and distribution costs, squeezing profit margins in an already difficult economic climate. Industry bodies report that since the tax was introduced, the sector has faced weaker demand and declining revenues, even before any proposed rate increases.
Companies argue that the tax further undermines competitiveness at a time when they are already grappling with exchange-rate instability, inflation, and rising input costs. Declining domestic sugar production has compounded these challenges, limiting access to key raw materials while taxes on finished products continue to rise.
2. Investment, Jobs, and Supply Chain Impacts
The effects of the SSB tax extend beyond beverage companies themselves to the wider value chain. Lower demand for sugary drinks may reduce demand for locally produced sugar, affecting farmers and processors and complicating government efforts to promote backward integration under the Nigerian Sugar Master Plan.
Industry critics caution that steep or sudden tax increases could discourage new investment, reduce output, and lead to job losses among manufacturers, distributors, transporters, and retailers.
There are also concerns that imposing excise taxes without parallel support—such as incentives for reformulating products, diversifying offerings, or expanding export capacity—could weaken the position of Nigerian beverage firms compared to competitors in other markets.
3. Regulatory Uncertainty and Compliance Challenges
Ongoing discussions about revising the SSB tax create uncertainty for businesses. Companies must continually adjust pricing strategies, production plans, and compliance systems in anticipation of possible changes.
Repeated legislative debates over tax levels reinforce the perception of an unstable policy environment, making long-term planning more difficult for both local and multinational firms operating in Nigeria.
Source: Getty Images
Conclusion
Nigeria’s sugar-sweetened beverage tax reflects a broader global shift toward using fiscal tools to address rising rates of obesity and non-communicable diseases while also mobilising revenue for public health. Although the policy is rooted in legitimate health objectives, its structure and rollout have raised questions about effectiveness, fairness, and economic consequences.
For consumers, the tax increases prices and, at its current level, has produced limited evidence of meaningful changes in consumption. For producers, it adds to cost pressures, influences investment decisions, and affects interconnected supply chains tied to sugar and beverage production.
Ultimately, the success of the SSB tax will depend on whether it is complemented by measures such as earmarking revenues for health programmes, expanding consumer education, and engaging industry to support healthier products and sustainable economic development.
NAFDAC enforces ban on sachet alcohol
Meanwhile, the National Agency for Food and Drug Administration and Control (NAFDAC) has kicked off its nationwide enforcement of the ban on the production and sale of alcohol in sachets.
The move seeks to stop the widespread availability of high alcohol content drinks in small, cheap, and easily concealed packages.
According to Legit.ng, the ban extends to PET bottles below 200 ml as the agency said the availability poses public health risks, especially to minors and young adults.
Source: Legit.ng
