Analysing Nigeria’s claim for taxing sugar beverages

Mama Risikat Kasali’s back burned from the welts of the scorching sun as she dropped the ice cold bowl of cold drinks in front of Ikeja City Mall that heated afternoon.

She had spent the better part of that day chasing customers who alighted at the Alausa secretariat bus, asking if they were seeking sausage rolls and soft drinks for their on-the-go meal.

She is however obvious of the latest tax the federal government passed on January 2022 on carbonated drinks.

The rise of sugar tax in Nigeria

On January 5, 2022, the federal government introduced sugar tax on non-alcoholic beverages. Then finance minister, Zainab Shamsuna Ahmed disclosed it this while giving a breakdown of the highlights of the 2022 Appropriation Act saying the tax became law to discourage excessive consumption of sugar in beverages.

She stated that the sum of N10 per litre had been imposed on sweetened beverages as part of critical policy thrusts of the Finance Act 2021.

“In Section 17 of the Finance Act, there is a law that has imposed a duty on non-alcoholic carbonated sweetened beverages. There is an excise duty of N10 per litre imposed on all non-alcoholic carbonated and sweetened beverages and this is designed to discourage excessive consumption of sugar in beverages which contributes to a number of health conditions including diabetes and obesity.

“This new sugar tax is introduced to raise excise duties and revenues for health-related issues and other critical expenditures. It is in line with the 2022 budget priorities.”

This is not the first time a country has imposed a tax on sugar-sweetened beverages (SSBs). A blog, Obesity Evidence Hub revealed that at least 55 countries have introduced a tax on SSB, including the United Kingdom, South Africa and Mexico. A few blogs report that the approach works in stemming the tide of sugary drinks consumption, especially in Mexico and South Africa.

Quite commonly, research has continued to advocate for how excessive taxation on tobacco, alcohol, and sugary beverages could avert 10 million premature deaths each year and about 16 per cent of all deaths in the world. Already the research noted that six million deaths are linked to diabetes and obesity as a result of the growing sugar consumption in low and middle-income countries and amongst adolescents. While these benefits may be very good, they fail to account for the unemployment ripple effect that could affect businesses if these SSBs taxes are enforced and increased over time in countries, especially like Nigeria.

Blowback

Already, the Manufacturers Association of Nigeria (MAN) kicked against the federal government’s idea to tax drinks, noting that it could hurt 1.5 million jobs.

The Director-General of MAN Segun Ajayi-Kadir said that the pronouncement was just a way of taxing the vulnerable and raising revenue for government projects.

“We know, for instance, that the food and beverage sub-sector contributes about 38 per cent of the manufacturing contribution to Gross Domestic Product (GDP) and 22.5 per cent of the jobs created, employing 1.5 million persons. We have a feeling that this is the kind of sector we need to guide against any negative thing falling there.

“We see that in the long run, the introduction of this excise duty will not augur well for revenue for the government and performance for the sector. The way it hits us, we are looking at a situation where it ought to be revisited with adequate dialogue and then we can find a common ground.
“It is what has been described by some who have commented on it as ‘pennywise and pound foolish’ in a sense. If you look at a revenue gain of N81 billion between 2022 and 2025, you compare this with a possible revenue loss of N142 billion in Value Added Tax (VAT) and N54 billion in Company Income Tax (CIT) over this period, I think it would be a better idea to allow the sector to continue on its growth pathways.”
In another opinion piece by the chairman of the Foundation for Consumer Freedom Advancement, Olumayowa Okediran, he believes that the argument of taxing Nigerians to avoid them from consuming sugar drinks doesn’t carry water.
“According to the minister, this policy will discourage excessive sugar consumption in beverages. And because it contributes to several health conditions like diabetes and obesity, the government thinks this tax will raise revenues for the health sector. If you think about it, this argument is flawed. Excessive sugar consumption is not the only known cause of diabetes and obesity; neither is increased taxes the solution to diabetes.”
Already, the acting managing director of BUA Foods, Ayodele Abioye, said that the imposition of sugar tax on companies could impact the firm’s production of sugar.
“The impact of tax as we know is going to affect our customers largely in the downstream value chain of the food industry and that will also have a backward impact on us. However, we believe that the market is underserved,” he said.

Findings

The World Health Organization (WHO) defines diabetes as a chronic disease that occurs either when the pancreas does not produce enough insulin or when the body cannot effectively use the insulin it produces.
It explains that insulin is a hormone that regulates blood glucose. It further stated that Hyperglycaemia, also called raised blood glucose or raised blood sugar, is a common effect of uncontrolled diabetes and over time leads to serious damage to many of the body’s systems, especially the nerves and blood vessels.
While there are different types of diabetes, two are the most common, Erica Julson, a registered dietician nutritionist wrote in an evidence-based article on the health blog, Healthline.com.
According to her, Type 1 is caused when the immune system is attacked by the pancreas and insulin production is stopped while type 2, usually the commonest, is when the pancreas stops producing insulin.
She said that while there are links that prove that high sugar intake lead to outright diabetes, not one research has been able to prove that sugar causes diabetes.
She acknowledged the fact that people who regularly drink sugar sweetened beverages have a 25% risk of type 2 diabetes. She also argued that the impact of fructose can increase the risk of the impact, but may not significantly lead to diabetes as claimed by Nigeria’s finance minister.
She further explained that natural sugars do not contribute to diabetes, adding that natural sugars can be found in fruits and vegetables that have not been processed.
Also, a United Kingdom health blog, Diabetes UK, while providing the distinction between sugar and diabetes states that one doesn’t need to cut out sugar if one has diabetes. It goes further to argue that for diabetes type 1, sugar “doesn’t directly cause the condition.”
In the case of whether sugar causes diabetes type 2, it says that ideology is too simplistic.
“The question of whether sugar directly causes type 2 diabetes is a bit complicated. Because diabetes is a condition where blood sugar levels are too high, it’s all too easy to think eating too much sugar is the cause,” it stated.
The health blog clearly states that sugar doesn’t cause diabetes type 1 as it is a matter of insulin-producing cells in one’s pancreas being destroyed by the immune system. For diabetes type 2, it says that being overweight makes it more likely for one to suffer diabetes.
“You gain weight when you take in more calories than your body needs, and sugary foods and drinks contain a lot of calories.

“So you can see if too much sugar is making you put on weight, then you are increasing your risk of getting type 2 diabetes. But type 2 diabetes is complex, and sugar is unlikely to be the only reason the condition develops,” it explains.
Medical News Today states that research on whether sugar consumption leads to diabetes type 2 is still ongoing.
“Research into the connection between sugar consumption and type 2 diabetes is ongoing. Eating sugar alone may not lead directly to diabetes, but sugar may play a role. Diabetes is a complex condition that results from a range of factors.”

One thing is clear from these three scientific journals, high calories can lead to obesity which in turn, can be a risk factor for diabetes 2.
Harvard School of Public Health is affirmative that excessive sugar intake leads to diabetes. It states that there is strong evidence that sugar-sweetened soft drinks contribute to the development of diabetes. It adds that people who take between 1-2 cans of sweetened beverages daily have a 26% greater risk of developing type 2 diabetes than people who rarely have such drinks, noting that the risk is greater in young adults and Asians.

It is important here to add that the World Health Organisation (WHO) recommends no more than 10% of sugar daily for consumption. In fact, the American Heart Association (AHA) recommends a maximum of 9 teaspoons or 36 g or 150 calories of sugar daily for males while it sets the maximum limit of 6 teaspoons or 25 g or 100 calories daily for females.
Emeritus Professor at the University of Ibadan, who specialises in Human Nutrition, Professor Tola Atinmo, argues that sugar must be avoided at all costs.
“If you eat too much sugar, it is related to heart disease, diabetes and obesity. There are three problems. There is a cardiovascular problem. There is a direct relation between too much sugar and those causes- obesity, heart disease and diabetes. You have to educate the people to understand that they should take very little sugar,” he said.
“As an expert, I don’t take sugar. It is better to avoid it. All these sweet drinks, Coca-cola and Chivita, you have to avoid it to live long. Type 2 diabetes affects people who are very old. From 40 onwards, you have maturity-onset diabetes because your pancreas cannot produce a lot of insulin. You have to undergo various issues. You have to avoid it,” Professor Atinmo added.

ICIR