A legislative redo of an executive reform: The sugar tax misstep

Nigeria’s fiscal architecture is in the midst of a deliberate, technically driven reset. The Federal Government’s Presidential Fiscal Policy & Tax Reform Committee (FPTR) is building an integrated, evidence-based framework to simplify taxes, broaden the base and restore investor confidence. Yet, in parallel, the Senate is advancing an amendment to the Customs and Excise Tariff Act that would replace the long-standing flat N10 per litre excise on sugar-sweetened beverages (SSBs) with a percentage-based levy tied to retail price, a move that risks creating policy duplication, administrative contradiction, and economic harm. The problem is not merely political: it is a governance problem in which two centres of power appear to be running different playbooks on the same policy turf.

The FPTR’s mandate is straightforward and urgent. Created to harmonise Nigeria’s fragmented tax landscape, the committee is designing reforms to improve predictability, enforceability and revenue performance while protecting nascent industries and jobs. Key objectives include reducing the spectrum of overlapping levies, strengthening a central revenue architecture and ensuring new measures are grounded in economic modelling and administrative feasibility. That is exactly the kind of discipline a complex economy needs as it seeks higher tax-to-GDP ratios without stifling output. The Senate amendment, by contrast, was advanced without clear technical alignment with the FPTR’s ongoing work and contains provisions that are economically and operationally ambiguous.

At stake is one of Nigeria’s most sensitive industrial subsectors: non-alcoholic drinks (NAD). The NAD value chain supports manufacturing, distribution, logistics and tens of thousands of micro- and small traders across urban and rural Nigeria. The sector is also a major industrial off-taker for domestic sugar under the Nigeria Sugar Master Plan (NSMP II), a strategic policy being pursued to drive backward integration, rural employment and local value addition. Any abrupt or poorly thought-through tax shock to beverages would therefore have ripples that go well beyond domestic consumption: reducing sugar demand, undermining investment in cane cultivation and processing, and jeopardising jobs along the entire value chain.

The Senate’s proposed structure is particularly problematic because it blurs the line between valuation bases and administrative responsibility. Moving excise calculations to “retail price” in law transforms a production-gate tax into a retail-monitoring exercise that customs and excise authorities are not set up to perform. Historically, excise in Nigeria is administered at the point of production or importation to limit evasion and simplify audits. A retail-based ad valorem mechanism would force customs and tax authorities to monitor millions of retail transactions, open the door to pricing disputes, and dramatically raise compliance costs for both government and business. In short, the proposal substitutes administrative complexity for the very predictability the FPTR is trying to build.

Read also: Sugar-Sweetened Beverage Tax: Which way to go?

There are also immediate macro-fiscal risks. The beverage sector already confronts steep input cost inflation, foreign-exchange shortages and weak consumer purchasing power. In these conditions, the sector’s effective fiscal burden is high; empirical modelling from industry studies shows that aggressive excise increases can reduce capacity utilisation and shrink gross value added. The Manufacturers Association of Nigeria and sector analysts have cautioned that poorly designed levies could compress revenues over the medium term by depressing the tax base (lower VAT and CIT) and encouraging informal substitution or cross-border arbitrage. Fiscal logic here is basic: beyond a threshold, higher statutory rates can reduce, not raise, government revenues.

Public health arguments, the ostensible rationale for higher SSB taxation, deserve sober scrutiny. Nigeria’s per capita sugar intake is low by international standards, and the contribution of SSBs to overall caloric intake is limited. Global health organisations caution that SSB taxation is not a universal “best buy”; outcomes depend heavily on local consumption patterns, supply chains and the availability of healthier substitutes. In a context where many households are sensitive to price shocks and where food insecurity remains widespread, regressive price increases are likely to exact outsized harm on lower-income consumers without delivering commensurate health gains. Any health-financing design based on excise earmarking must therefore be supported by rigorous, country-specific impact assessment.

Beyond technicalities, the episode exposes a governance fault line: the legislative and executive branches must synchronise on major fiscal instruments. Policy overlap and contradictory action reduce predictability and raise political risk premiums for investors. The FPTR is building a toolkit intended to be harmonised across ministries and agencies; unilateral legislative amendments that preempt that process risk fragmenting the policy landscape the FPTR is trying to standardise. This is not an argument against oversight or legislative initiative; it is an appeal for coordination and sequencing. Good policy requires robust public hearings, peer-reviewed modelling, and clear administrative pathways, all of which are part of the FPTR’s remit.

What, then, should be done? First, the Senate should pause and withdraw any provisions that materially depart from the FPTR’s technical framework pending the committee’s final recommendations. A short moratorium would not be a retreat from fiscal responsibility; it would be a commitment to evidence-based reform.

Second, the FPTR should accelerate the publication of sectoral impact assessments, with transparent modelling on revenue effects, employment, forward linkages to the sugar value chain, and distributional consequences.

Third, any SSB policy should be designed with clear administrative anchoring, ideally at production or importation points, and include targeted measures to protect vulnerable MSMEs and informal distribution networks.

Fourth, stakeholders must commit to a binding coordination protocol: legislative drafters, the Ministry of Finance, FIRS, NSDC, FAAC representatives and industry bodies should sign a memorandum of understanding on tax policy sequencing and impact assessment.

Nigeria’s fiscal challenge is large and legitimate. The country needs new revenue streams to fund infrastructure and social services. But the way those revenues are raised matters. Piecemeal, contradictory measures that fail to account for industrial linkages, administrative capacity and distributional impacts risk doing more harm than good. The FPTR offers a pathway to harmonised, credible reform; the Senate should not undercut it with standalone interventions that create duplication and uncertainty.

In policymaking, timing and coherence are as important as intent. If Nigeria is serious about scaling up sustainable revenues while protecting jobs and industrial development, the solution lies in joining technical forces, not in legislative duels. The sugar tax debate should therefore become a case study in collaborative policy design, one that puts modelling, administration and national strategy ahead of isolated legislative action.

Prof. Godfrey Omojefe, the President of the Chartered Institute of Financial and Investment Analysts of Nigeria (CIFIAN), is a leading voice in sugar-sweetened beverages and non-alcoholic drinks taxation issues.

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