Nigeria is considering changes to how it taxes sugar-sweetened beverages (SSBs). A proposed amendment to the Customs, Excise Tariff, Act (CETA) would replace the flat ₦10-per-litre excise with an ad valorem tax based on the value of the beverages. The bill was passed at its Third Reading by the Senate on 4 June 2026 and has been transmitted to the House of Representatives for concurrence.
The proposed tax aims to achieve two objectives: reduce excessive sugar consumption and raise additional revenue for healthcare and public health programmes. The Senate has also supported using part of the revenue to fund health promotion, disease prevention, primary healthcare and health insurance for vulnerable Nigerians.
However, the proposal comes at a difficult time for Nigerian businesses and households. Inflation, rising operating costs, foreign exchange pressures and declining purchasing power continue to affect economic activity. Policymakers must therefore consider whether the proposed tax can achieve its health and revenue objectives without creating additional pressure on consumers and businesses.
Public health and socioeconomic conditions
The main argument for taxing sugary drinks is that excessive sugar consumption increases the risk of non-communicable diseases, including obesity and diabetes. Higher prices can discourage consumers from buying these products. Well-designed taxes can also encourage manufacturers to reduce sugar content and introduce healthier alternatives.
However, Nigeria’s current consumption patterns and socioeconomic conditions must inform the policy.
Data from the National Sugar Development Council show that apparent per-capita sugar consumption declined from 8.4kg in 2022 to 7.1kg in 2023, equivalent to approximately 19.5 grams per person per day.
Affordability is another consideration. The 2022 National Multidimensional Poverty Index found that 133 million Nigerians, or 62.9 per cent of the population, were living in multidimensional poverty. Against this backdrop, higher beverage prices could place an additional burden on households with limited purchasing power.
The challenge is to pursue the potential health benefits of the tax without disproportionately affecting lower-income consumers.
Economic implications for the beverage industry
The beverage industry supports a broad value chain spanning manufacturing, sugar production, packaging, transportation, distribution and retail. According to the Manufacturers Association of Nigeria (MAN), approximately 1.5 million jobs depend directly or indirectly on the sector. Changes in production and consumer demand could therefore affect businesses and workers beyond beverage manufacturers.
The industry is already operating under pressure. Data from the National Sugar Development Council (NSDC) show that Nigeria’s sugar consumption declined from 1.72 million tonnes in 2022 to 1.44 million tonnes in 2023, a fall of approximately 16 per cent. Domestic sugar production also dropped by 35 per cent, from 46,479 tonnes to 30,053 tonnes.
The decline in sugar consumption and domestic production reflects the broader pressures facing Nigeria’s sugar and beverage industry. Rising production costs, exchange-rate volatility and weaker consumer purchasing power have made it more difficult for manufacturers to sustain output and meet demand. Introducing a higher beverage tax in this environment could add another cost pressure for an industry already facing these challenges
Nigeria’s reliance on imported sugar further exposes the industry to external price and currency pressures. The country imports an estimated 1.4 million to 1.7 million metric tonnes of refined sugar annually, leaving manufacturers vulnerable to fluctuations in international prices and exchange rates. This dependence also increases the cost of raw materials for local producers.
Figure 2: Nigeria’s Sugar Consumption and imports, 2018–2023
With these pressures already weighing on the industry, a higher beverage tax could increase production costs for manufacturers and raise retail prices for consumers. This may affect demand for locally produced beverages, with wider implications for sales, output and employment across the industry. The proposed reform therefore requires careful consideration of its implications for the beverage industry, household spending and the government’s public health objectives.
Tax administration and policy consistency
The proposed amendment would change how excise duty is calculated and administered. Under the current system, manufacturers pay a fixed ₦10 for every litre of beverage produced or imported, regardless of its selling price. This makes the tax relatively straightforward to calculate and collect, as the amount payable is based solely on the volume of beverages.
Under the proposed ad valorem system, the tax would be calculated as a percentage of each product’s value. This introduces additional steps for tax authorities, which would need to establish the taxable value of different beverages and verify the prices declared by manufacturers. Differences in product prices, discounts and distribution arrangements could make the process more demanding and create room for disputes over tax assessments.
For manufacturers, these requirements could mean additional compliance costs, while government would need stronger valuation and monitoring systems to ensure accurate collection. The proposed change therefore raises a broader question about the direction of Nigeria’s tax policy. At a time when ongoing reforms are aimed at simplifying tax administration and improving the business environment, the government must consider whether the expected revenue gains justify the additional administrative burden
What Nigeria can learn from other countries
Countries that have introduced taxes on sugar-sweetened beverages have adopted different approaches, with varying implications for manufacturers and consumers.
Rwanda applies an ad valorem excise tax to certain non-natural beverages, calculating the tax based on product value rather than sugar content. While this approach can generate revenue, it does not directly encourage manufacturers to reduce the sugar content of their products.
South Africa takes a different approach through its Health Promotion Levy, which taxes beverages according to their sugar content. This gives manufacturers a financial incentive to reformulate their products and reduce sugar levels. Research found a reduction in sugar purchased from taxable beverages following the introduction of the levy. However, increased consumption of some non-taxable sugary drinks suggests that some consumers may have switched to alternatives.
The United Kingdom also uses sugar-content thresholds to encourage manufacturers to reformulate their products. By linking the tax to sugar levels, the policy gives producers a reason to reduce sugar content rather than simply adjust selling prices.
For Nigeria, the key consideration is whether the proposed tax should be based on the value of beverages or their sugar content. If reducing sugar consumption is a central objective, South Africa and the UK offer useful examples of how linking taxation to sugar levels can encourage manufacturers to reformulate their products.
Policy Recommendations and Way Forward
Nigeria’s proposed SSB tax must balance three objectives: reducing excessive sugar consumption, generating public revenue and limiting the impact on businesses and households.
