Nigeria’s new excise tax on Tobacco is actually in line with Economic Community of West African States (ECOWAS) and the World Health Organization (WHO) directives, which urged member States and Countries to increase duty rates on tobacco products in order to curtail abuse and promote moderation in consumption.

An excise duty is a type of tax charged on goods produced within the Country, as opposed to customs duties, charged on goods from outside the country.

Earlier in March, the Federal Government approved an amendment to excise duty rates for alcoholic beverages and tobacco which would span from 2018 to 2020.

According to the Minister of Finance, Kemi Adeosun, the new excise duty charges are aimed at improving Government’s revenue while also reducing the health hazards in tobacco-related products.

“The Tariff Technical Committee (TCC) recommended the slight adjustment in the excise duty charges after cautious considerations of the Government’s Fiscal Policy Measures for 2018 and the reports of the World Bank and the International Monetary Fund Technical Assistance Mission on Nigeria’s Fiscal Policy.

“Furthermore, peer Country comparisons were also carried out showing Nigeria as being behind the curve in the review of excise duty rates on alcoholic beverages and tobacco.

“The effect of the excise duty rates adjustment on trade and investment was also assessed by the Federal Ministry of Trade and Investment and it adopted the recommendations of the TTC.”

The Minister affirmed that the excise rate is a combination of ad-valorem base rate (of taxes) in proportion to the estimated value of the goods taxed) and specific rate for tobacco, while that of alcoholic beverages would be replaced.

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The new tobacco excise rates would result in an addition to the 20% ad-valorem rate, each stick of cigarette will attract one naira specific rate per stick; that is N20 per pack of 20 sticks in 2018.

This would be increased to N2 specific rate per stick (N40 per pack of 20 sticks) in 2019; and N2.90k specific rate per stick (N58 per pack of 20 sticks) in 2020.

The new regulations are in tandem with Economic Community of West African States (ECOWAS) directive on the harmonisation of Member-States’ legislations on excise duties and the World Health Organization (WHO).

ECOWAS in its 62nd and 79th Ordinary Sessions held in Abuja in May 2009 and December 2017, respectively, urged Members States to increase excise duties on tobacco and other unhealthy products to increase revenue and reduce consumption of such products in the sub-region.

Also, during the global commemoration of the ‘World No Tobacco Day’ 2018, WHO called on Countries around the World to increase tax on tobacco, monitor its usage and establish prevention policies.

The Organization said nearly 80% of the more than one billion smokers worldwide live in low and middle-income Countries where the burden of tobacco-related illness and death is heaviest.

“Tobacco use is an important risk factor for the development of coronary heart disease, stroke and peripheral vascular disease.

“Despite the known harms of tobacco to heart health and the availability of solutions to reduce related death and disease, knowledge among large sections of the public that tobacco is one of the leading causes of Cardiovascular Disease (CVD) is low.

“CVD kills more people than any other cause of death worldwide and tobacco use and second-hand smoke exposure contributes to approximately 12 per cent of all heart disease deaths. Tobacco use is the second leading cause of CVD after high blood pressure.”

Too much smoke?

According to the Minister of Health, Isaac Adewole, Nigerians consumes 20 billion sticks of cigarette annually, with about 4.5 million adults currently into tobacco products while 82% of people who go to nightclubs frequently are exposed to second-hand smoke.

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However, tobacco growing is only a small fraction of agriculture in Nigeria, with only 0.01% of agricultural land devoted to tobacco cultivation.

Adewole revealed that Nigeria is estimated to be losing $800 million annually to stroke, heart disease, and diabetes.

“Let me draw attention to the fact that tobacco use is responsible for huge economic losses emanating from both direct and indirect medical costs.

“In 2015, the projected accumulated loss to tobacco was put at $7.6 billion.”

He iterated that for every $1 gained on tobacco business, about $3 dollars is spent on healthcare cost.

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