The Federal Government of Nigeria (“FGN”) has, via a Circular dated 7 February 2019 (“the Circular”), revised the excise rate on products classified under tariff heading (TH) 22.06. These products (together referred to as “the Affected Products”) are:
- Other fermented beverages (for example, Cider, Perry, Mead, Sake);
- Mixture of fermented beverages; and
- Mixture of fermented beverages and non-alcoholic beverages not elsewhere specified or included
The prescribed rates for the Affected Products are ₦0.30K per centilitre effective from 4 June 2018 to 3 June 2019 (i.e. the first year) and ₦0.35K per centilitre from 4 June 2019 (i.e. the start date of the second year).
The new excise rates represent a significant reduction in the excise rates for the Affected Products. Prior to the Circular, beverages with relatively lower alcohol content (than beer and stout), paid excise at a rate as high as ₦1.50 per centilitre.
This was based on a circular issued in March 2018 and referenced 17642/II/172 (“2018 Circular”) which introduced a new excise regime (effective 4 June 2018). This regime generally increased the excise chargeable on excisable products (i.e. tobacco and alcoholic beverages) and changed the basis of levying excise from ad-valorem to specific.
With this reduction in excise rates for the Affected Products, the Circular has the following practical effects:
- Addresses the controversy surrounding the rate and structure of the increase – particularly charging products with similar alcohol content at different rates;
- Clarifies the applicable basis periods for the excise regime documented in the 2018 Circular as the first year and second year as described above; and
- Resolves an erstwhile ambiguity from the 2018 Circular which did not specify the commencement date of the second year of the new excise regime
The Circular nonetheless raises some practical concerns namely the need to:
- Clarify the basis periods for the second and third years of the excise regime;
- Recalibrate the rates on other excisable products to ensure the rates promote local production and not importation; and
- Confirm what refund or credit mechanism would be available to manufacturers who remitted excise based on the 2018 Circular
We are not unaware that there may be some manufacturers who may not have remitted excise on the Affected Products during the period 4 June 2018 to 7 February 2019.
Whilst this Circular by the FGN is laudable, it is not in doubt that the revision it makes to the excise rates would adversely impact potential FGN earnings. It is, however, our view that such adverse impact should be outweighed by the relief to manufacturers and consumers affected by this Circular.
Please click here for a summary of the current excise rates.