Nigeria has the potential of earning up to N600 billion by imposing excise duty on beer alone, if the country utilizes her potential on the excise regime, the World Bank has estimated.
According to the bank, enhancing the excise regime offers the country an immediate opportunity for revenue increases.
It observed that, although effective tax rates have increased marginally over the past five years, at 0.06 percent of GDP, Nigeria’s excise taxes are among the world’s lowest.
The bank, in a document unveiled recently on Nigeria’s economy – Nigeria Country Economic Memorandum, listed out a number of options available for the largest country in Africa continent to boost her revenue.
The bank said: “While the primary purpose of an excise tax is to internalize the social cost of harmful goods such as alcohol and tobacco, their revenue can also be important. Nigeria does not subject liquid fuel to tax, which is unfortunate since excise taxes could capture the cost of the burden of fuel on the environment, and this revenue source is inherently stable because demand for fuel is inelastic.”
It added that, “similarly, Nigeria fares poorly in the administration of health taxes, having among the lowest excise taxes on alcohol and tobacco globally.”
The Bank also noted that the recent addition of a N10 per litre excise duty on non-alcoholic, carbonated and sweetened beverages in the Finance Act of 2021 points to some appetite for marginal change. It said the level of ambition was still low, noting that the change is estimated to only raise N33 billion in 2023.
It commended the Federal Government’s decision to increase taxes on select items to ramp up more revenue from non-oil sources.
“The Federal Government has indicated a commitment to increasing specific taxes on cigarettes from N2.9 to N4.2 per stick on top of the ad valorem rate of 20 per cent. While this is commendable, it is still marginal in impact both for the health and revenue mobilisation. The effective tax rates for both alcoholic and tobacco are less than half of the median of Nigeria’s Africa peers,” it said.