THE Federal Government of Nigeria will rake in as much as N67.7 billion (US$187 million) over a one year period from the new taxation policy on tobacco in the country, a report has revealed.
The report, authored by Grace Onubedo and Precious C. Akanonu, both Senior Research Fellow and Research Fellow at Centre for the Study of the Economies of Africa (CSEA), Abuja was the outcome of a study by the Centre titled “ A Scoping Study of Nigeria’s Tobacco Market and Policy.
In June 2018, the new tax policy on tobacco kicked off. According to the Federal Government, the new excise duty rates would spread over a three-year period from 2018 to 2020 in order to moderate the impact on prices of the products.
Under the new rates for tobacco, in addition to the 20 per cent ad-valorem rate, each stick of cigarette will attract one naira specific rate per stick; that is N20 per pack of 20 sticks in 2018.
In 2019, tobacco will attract two naira specific rate per stick or N40 per pack of 20 sticks.
By 2020, tobacco would begin to attract N2.90 kobo specific rate per stick or N58 per pack of 20 sticks.
The Centre commended the government for this move as “a step in the right direction,” but noted that duty remains below the standard recommended by the World Health Organization (WHO).
CSEA study highlighted that support for tobacco taxation increases by 17 per cent, if earmarking is introduced, especially among smokers.
“Most of the respondents view tobacco taxation and earmarking as a means to help smokers quit and improve the wellbeing of citizens,” the report said.
“In terms of the wellbeing, respondents prioritize earmarking for public health programmes including treatment of tobacco-related diseases, and social programmes for poor households (such as cash transfers).”
It revealed also that all other government parastatals support adding tobacco revenue to the pool of government revenue except the Ministry of Health.
What 50 per cent of N67.7 billion can do for the health sector
Nigeria currently has one of the lowest budget allocations to the health sector. The AU’s Abuja declaration of 2001, stipulates that 15 percent of the national budget should go to the health sector, but Nigeria only allocates 3.9 percent of total budget to the health sector in 2018.
This implies that government spends a meager sum of N1,888 on each citizen’s health care need for the whole year. This reflects negatively on Nigeria’s health indices; the WHO ranks Nigeria 187th out of 191 countries in terms of health care delivery.
Following the arguments of pro-earmarks, earmarking tobacco revenue ensures a continuous, regular source of funding that are not subject to annual budgetary review.
From the CSEA’s stakeholder analysis, 25percent -50 percent of tobacco tax revenue is proposed as the earmarking benchmark. Applying 50 percent to N67.7billion expected revenue would yield an additional N33.9billion of earmarked revenue to the health sector over a one-year period.
This will result to 9 percent increase to the sum allocated for citizen’s health care. Similarly, earmarking tobacco taxes can provide a sustainable source of financing for tobacco control. In 2017, about 0.028 per cent of the Federal Ministry of Health budget was allocated for setting up tobacco control unit (TCU) in 2017. However, the TCU received no funds in 2018 due to the ministry’s budget constraints.