Making it Count: The Next Battle Over Nigeria’s Sugary Drinks Tax
Sugary drinks are now taxed in Nigeria to tackle obesity, diabetes, and other NCDs.

Nigeria began imposing a new tax on sugar-sweetened beverages on 1 June, but the aim of using the money raised to help curb the growing rates of obesity, diabetes and other diet-related non-communicable diseases (NCDs) faces a host of challenges including a multibillion-dollar industry.

IBADAN, Nigeria – Working for long hours under a scorching sun, automotive repair worker Alfa Sodeeq gets thirsty often but isn’t content to just drink water. Since he can’t afford to take breaks long enough to find something healthy to drink, he often settles for a cold soda — loaded with sugar.

“A woman sells cold drinks from across my shop. All I need to shout is ‘give me one bottle’ and she will be there with one,” says Sodeeq, who operates a one-man automotive body repair shop. “On the average day, I drink about three large (50cl) bottles of Coke.”

That translates to 36 cubes of sugar daily, or 12 per bottle, which, when added to the late-40s Sodeeq’s three calorie-heavy meals, puts him at risk of obesity and diabetes, according to a Nigerian NGO, the National Action on Sugar Reduction (NASR). But Sodeeq, who weighs about 80kg, says he prefers not to know too much about his diet because “what you don’t know cannot kill you.”

Sodeeq’s dependency on sugary drinks may put him at risk of diabetes and obesity.

Sugary drink tax may generate more revenue than  health benefits

Sugary drink taxes around the world.

With the introduction of a tax on sugar-sweetened beverages under  Nigeria’s 2021 Finance Act, the Nigerian Customs Service on 1 June began implementing a new tax on sugary drinks.

The tax rate of N10 per litre applies to all non-alcoholic, carbonated beverages that contain sugar and are produced domestically — in a country where local manufacturers account for the majority of all soft-drinks production.

WHO has projected that a 20% rise in prices will lead to a comparable 20% reduction in consumption, but that has not turned out to be case always. The actual figures reflect a need for policymakers to adapt to the local context.

Despite the new tax, Sodeeq says he won’t stop drinking soda since it’s so convenient while he’s working. As he sees it, everything in his local market is already priced high — and the little bit more he will have to pay for sodas won’t alter his lifestyle.

“Everything is more costly, not just Coke,” he says. “So why will I stop when I’m making money from my work?”

Nigeria has highest prevalence of diabetes in Africa

Checking blood sugar levels for control of diabetes

Sodeeq’s example shows the challenge that Nigeria faces; the nation’s new sugary drinks tax is intended to discourage people like him from consuming too much sugar in their beverages.

The new tax is in line with the thinking of the World Health Organization (WHO) and some NGOs, along with a variety of major donors and researchers, that recommend addressing some of the health risks of NCDs through higher taxation of sugary drinks, in a bid to lessen their consumption.

Excessive sugar consumption, particularly in beverages, is associated with NCDs such as diabetes, heart disease and obesity, which in turn is an important risk factor in cancer. 

Tackling excessive sugar intake in Nigeria is particularly important considering the country has Africa’s highest prevalence of diabetes with over 12 million Nigerians living with the disease. 

According to the WHO, people who drink one to two cans a day or more of sugar-sweetened beverages regularly have a greater risk (26%) of developing Type 2 diabetes than people who rarely consume such drinks. 

Relative to other countries in Africa, Nigeria has a high burden of NCDs, which account for 24% of total deaths and are projected to be the leading cause of morbidity and mortality by 2030. 

“Sugar taxes are a proven and evidence-informed solution to the prevention and control of NCDs and related risk factors, and their use needs to be stepped up globally,” the NCD Alliance says in a policy brief welcoming the Nigerian move.

Nigerian price surge too small, and muted by inflation

African soda brands.

The Nigerian policy, however, has some drawbacks, the NCD Alliance notes. The new tax will only increase the total price of the average 50cl bottle of soda by 5% or less, it notes, which is far from WHO’s 20% recommendation. A bottle that used to cost N120 will now cost N125.

Even in countries with stiffer price increases, the impacts are mixed.  In Barbados, a 10% tax on sugary drinks led to just 4.3% less consumption, Barbados Health Minister Ian Gooding-Edghill told a World Health Assembly side event in May.

Sugary drink taxes in Mexico, Caribbean, Central and South America

On the other hand, Mexico’s 10% sugary drinks tax is considered a success since it began in 2014. In the first two years, consumption fell by an average of 7%, and more recently by as much as 12%, said Mexico’s Vice Minister of Health Hugo Lopez-Gatell told another recent WHA side event.

In South Africa, a 10% sugary drinks tax since 2018 led to a nearly 40% decline in sugar consumption from the taxed beverages among South Africans, according to a four-year study of 113,000 households published in The Lancet in April 2021. 

But the most successful initiatives also were part of a broader approach, proponents say.

That has included more awareness-raising about unhealthy foods in general, said Lopez-Gatell, noting Mexico recently implemented front-of-package labels about foods high in sugar and salts.

“It’s not confusing labeling, it’s warning,” he said. Further pending measures include limits on the types of unhealthy foods that markets can offer, and a law banning unhealthy foods sold in schools. 

Tax won’t yield dedicated revenues for health services 

Omei Bongos-Ikwue

WHO envisions a secondary aim for these taxes that goes beyond discouraging sugar consumption. It believes they also should provide revenue earmarked for health-related spending.

The UN health agency recommends spending it to improve health care systems and to put in place more effective programmes that encourage healthier diets, increase physical activity, or build capacity for effective tax administration. 

But in Nigeria, the law does not clearly earmark the revenue for health care; advocates say doing that would also engender more popular support for the tax increase. Instead, the money goes to the Finance Ministry’s general coffers. 

“There is a general pool where taxes go in,” NASR spokesperson Omei Bongos-Ikwue told Health Policy Watch. “Depending on the priority needs of the country, tax funds can be allocated. So earmarking the tax for health purposes doesn’t automatically mean that it will happen.

In her remarks at the announcement of the new tax, Zainab Ahmed, Nigeria’s Minister of Finance, Budget and National Planning, said that some of the revenue would be used for health but she didn’t make any commitments. 

“It is also used to raise excise duties and revenues for health-related and other critical expenditures.  This is in line also with the 2022 budget priorities,” the minister said.

Bongos-Ikwue described this as highlighting the need for raising more awareness and advocacy so as to press the government to allocate funds generated for health.

 Tax may be perceived as inflation related 

Prices at the market have risen in Nigeria.

In terms of impacts on consumers, the price increase attributable to the sugar tax also has been muted by the overall increase in the prices of commodities in Nigeria. 

As Sodeeq observed, costs of everything are rising now with inflation, and particularly at the market. 

Beverage distributors like Ige Olutoyin told Health Policy Watch that consumers will not necessarily appreciate that the increased price has anything to do with the drink’s sugar content, or with health.

“When the suppliers said the price is higher now, we simply implemented the price increase and when any buyer asks, we simply tell them that things are now more expensive in the market,” he said.

Further blurring the issue, particularly for middle-aged Nigerians like Sodeeq,  is the fact that taxes on carbonated drinks are not entirely new.

Between 1984 and 2009, the Nigerian government taxed sugar-sweetened beverages, alcoholic drinks and tobacco as luxury items to raise revenue, but the tax on sugar-sweetened beverages was removed in 2009 after such drinks became ubiquitous in the country.  

‘Everything else has gone up’

Bongos-Ikwue says the price of “everything else has gone up” in Nigeria, so people might attribute the cost increase for sugary drinks to inflation.

“This is why I think it is more important to engage with the stakeholders knowing that an additional tax has been placed on the beverages,” she says.

Beverage distributor Olutoyin agrees there is a need for more awareness about the supposed rationale behind the tax. Otherwise, he says, the government may generate more revenues, but the tax will not discourage excessive consumption of sugar-sweetened beverages.

Method of collection also muddies health argument 

He also says the method of collection plays a role in muddying the waters of the health argument. 

The fact that the government will bill the manufacturers directly, rather than taxing the drink at point of sale, Olutoyin says, also means that manufacturers and their distributors can even more easily steer the narrative about the tax to inflation, rather than health, especially if the government is not aggressively raising public awareness.

“I believe the government decided to collect it from the manufacturers because it is much easier to do,” he said. “If they want this to have more effect, it should be collected directly from the customer.” 

At the same time, taxing beverage manufacturers’ production may be the only realistic way to collect the new levy on a good that is later traded and sold by shops and informal markets across the vast nation. “This way, the [government] is able to account for the beverages produced within a period,” said Bongos-Ikwue.

The Herculean task ahead

Some argue that the tax may be counterproductive.

In anticipation of the tax, the Manufacturers Association of Nigeria (MAN) said the tax could be counterproductive and result in a loss of revenue for the government.

According to the report, about NGN81 billion could be collected from the excise duty on carbonated drinks between 2022 and 2025. But the government says it could lose up to NGN197 billion within that period from other taxes paid by drink manufacturers, such as Value Added Tax and Company Income Tax, if consumption of sugary drinks declines.

“The introduction of the excise duty, despite its potential overwhelming negative impact, is rather unfortunate. The revenue aspirations of the government in introducing this excise tax may not be justified in the long run,” said Segun Ajayi-Kadir, MAN’s director-general.

He said the tax could lead to job losses, but Bongos-Ikwue said such claims are unfounded.

In East and southern Africa, other sugary tax initiatives blocked by industry interests 

Industries have pushed back against Africa’s soft drink taxes.

Over the past few years, industry pushback in a number of other African countries, including Kenya, and Uganda, has effectively undermined efforts to introduce  sugary drinks taxation.

Research published in April 2021 by Global Health Action on seven east and southern African countries – Botswana, Kenya, Namibia, Rwanda, Tanzania, Uganda and Zambia – found all have excise taxes on soft drinks, but the tax levels are well below WHO recommendations. None of those taxes target sugar content. 

Only a few African countries impose sugary drink taxes, and these are well below WHO recommendations.

In Uganda, where NCDs account for one-third all deaths, authorities decided in 2018 to gradually reduce the excise tax on non-alcoholic drinks to 10%, down from 13%, as an enticement for Coca-Cola Co. to invest in the country; the company’s CEO in Uganda agreed it was a favorable move.

“The soft drink industry has been influential in framing the taxation debate,” says the authors of the 2021 Uganda case study.

Win-win  approaches – changing industry drink formulas and consumer awareness

There are multiple methods to reduce NCDs.

Not everything has to be a win-lose approach. In the UK, sugary drinks taxes, combined with stepped-up pressure and advocacy on manufacturers, prompted soft-drinks companies to reduce the sugar content in key products by changing formulations. This, along with  changes in consumer purchasing, led to a 30% reduction per capita in the daily volume of sugars sold in soft drinks.

In Nigeria, however, manufacturers are not yet being aggressively encouraged to fully embrace reformulation and, as such, the available options in significantly reducing sugar intake among the population is not being fully explored, Bongos-Ikwue says.

Advocacy was responsible for the progress made so far, she says, but still more advocacy is needed to extend the tax to other priorities. And she says other approaches can help, too, such as health education, front-of-package labeling about how much sugar is in beverages, and school programs.

“It’s a multipronged approach, she says. “Taxes are just one way; there are other different things, including education, on how to reduce NCDs.”

Kerry Cullinan contributed to this story with reporting from southern and eastern Africa.

Image Credits: Heala_SA/Twitter, Alan/Flickr, Global Health Research Program , Tih Ntiabang/Twitter , Thomas Stellmach/Flickr, James Hall/Twitter , Global Food Research Progrma, World Bank Tanzania/Twitter .

Combat the infodemic in health information and support health policy reporting from the global South. Our growing network of journalists in Africa, Asia, Geneva and New York connect the dots between regional realities and the big global debates, with evidence-based, open access news and analysis. To make a personal or organisational contribution click here on PayPal.