In a precedent-setting judgment, Justice Obiora Egwuatu of the Federal High Court has prohibited the Nigeria Customs Service (NCS) from levying excise duties on non-alcoholic carbonated drinks. This judgment, delivered on February 2, 2025, came as a relief to beverage manufacturers in the Nigerian soft drink industry.
A coalition of beverage companies filed this case in challenge of the excise duty introduced in 2022 under the Finance Act. While in court, it was argued that imposing this tax was unlawful and would further burden manufacturers already dealing with a rise in the cost of production, as well as hurting local competition.
The ruling affirmed that the tax was a violation of fair taxation as outlined by the constitution, with the potential to adversely affect local manufacturers. This could lead to higher production costs, job losses, and price increments for consumers.
The judgment noted that the excise duty disproportionately targeted a critical sector of Nigeria’s economy, where many local producers already face financial strain.
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According to Mr. Egwuatu, the excise duty would significantly hinder the growth of the local beverage industry. He also emphasized the long-term risk of stifling competition and innovation within the sector, potentially reducing the ability of Nigerian companies to compete with international players.
Stakeholders in the Nigerian soft drink industry have welcomed the ruling, noting that the unlawful taxation would have exacerbated the challenges they already face in a tough market environment.
Although the Federal Government is likely to review the ruling, the beverage industry has been granted temporary relief. With this new decision, the NCS is to halt the collection of excise on non-alcoholic carbonated drinks pending further orders from the court.
