Lagos — For brewing giants AB InBev, Heineken and Diageo competing for market share in Africa’s most populous country, the Nigerian government’s decision to hike excise duties is another setback in an underperforming economy.
“The tax increase is hitting revenue,” Michael Famoroti, economist and partner at Stears Business, said by phone from Lagos. “You are unlikely to see healthy revenue growth in the industry as the phased implementation continues. Companies will not be able to pass on the full burden of the tax.” “Consumers remain highly sensitive to price movements following the broad-based cost escalation in the past few years amid little-to-no income growth,” said Ifedayo Olowoporoku, a markets analyst at Lagos-based Vetiva Capital Management. “We expect higher pressure on discretionary, nonessential products such as beer.”The numbers were already bad in 2018. Heineken’s local unit, Nigerian Breweries, reported 2018 net income that fell 41% from the previous year to 19.
The brewers’ difficulties are forcing the government to have a rethink of the taxes, said Paul Abechi, a spokesperson for finance minister Zainab Ahmed. The administration is looking to address the tax grievances “in a mutually benefiting way’’, he said.While the brewers wait and see limited opportunities for growth in sales of lager, they’re pushing premium brands shielded from higher costs, as well as the nonalcoholic drinks exempted from excise charges.
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