Opinion

Nigeria: Tobacco – imperative of circumspect regulation

By Akeem Ogunlade

The Tobacco Control Bill, currently in the final stages of passage by the National Assembly, has generated considerable interest among contending parties over the last few months.

It is arguable that this interest is only superseded by the recent general elections and the accompanying debates.

The interest in the prospective bill, which will control the sale, distribution, promotion and consumption, among others, of tobacco in Nigeria, is understandable.

In many parts of the world, governments are increasingly inclined towards strict tobacco control in line with laid down regulation.

Governments recognize that in so doing, many issues are in contention. They recognize that there are health issues, but also economic, social as well as security issues. In the final analysis, tobacco is a legal product across the world.

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In Nigeria, two major contenders have been prominent with regard to the draft tobacco control bill. On one hand, the anti-tobacco campaigners have argued that no input should be sought, let alone considered, from tobacco manufacturers in putting the bill together.

Tobacco manufacturers on the other hand, have argued that as key stakeholders in the tobacco industry, it is important that their views and opinions are carefully considered as part of the regulatory process.

It appears that the approach so far adopted by the two legislative houses in the National Assembly has been that of inclusion, namely engaging all stakeholders and availing them an opportunity to make contributions to the draft bill. Both chambers have so far held public hearings on the document, during which no specific segment of the society was excluded from making submissions to the committees overseeing the bill.

Going further, the leaderships of both houses also made attempts to clarify issues by stating categorically, that the current effort at developing tobacco control legislation was not intended to close the tobacco companies and put the workers out of job. Both the chairman of the House Committee on Health and the Senate president made this categorical statement at different times.

The statement, general inclination and “body language” of the lawmakers are commendable and do, indeed, show that what is paramount in the minds of the lawmakers is a tobacco regulation that is balanced and ultimately addresses the public health concerns of smoking without necessarily creating other unintended social or economic problems.

Tobacco regulation, is indeed a minefield, and while anti-tobacco campaigners may strive to create the impression that all it takes to achieve a drastic reduction in smoking is to pen drastic anti-tobacco regulation, the fact and developments from around the world have confirmed that circumspection is imperative in this regard. This is why it is important that whatever measures that are being canvassed must be such that have taken due and realistic consideration of the realities of our local environment.

Tobacco regulation, which is imported wholesale from other countries, especially developed or first world countries, without considering the peculiarities of our local environment, including our porous borders, our security situation, our literacy levels among other key considerations, is not only likely to fail, but in the process, create worse problems for the society.

For instance, one fact that has been clearly established globally is the increasing link between organized crime and terrorism, on one hand, and cigarette smuggling, on the other. Cigarette smuggling is a very profitable business around the world for many reasons, including the fact that taxes are not paid on smuggled products.

Incidentally, because cigarettes are legitimate products which are in fairly high demand across the world, criminal and terrorist gangs have since found it to be an effective means of money laundering and have reportedly resorted to doing so in many countries.

The biggest incentive for cigarette smuggling, however, is unrealistically high taxation being slammed on the product. When disproportionately high taxes are imposed on cigarettes (relative to other goods and services in the economy), then the natural resort by majority of consumers is cheaper, smuggled brands.

This is the fuel that feeds the smuggling chain globally and unfortunately, in turn, powers the engine room of criminal gangs and terrorist organizations across many geographies.

This is one of the reasons, for instance, why discriminatory taxation has been aggressively canvassed against, not only by the tobacco industry understandably, but also by those who are adequately knowledgeable about this situation and appreciate its potential to backfire.

Advisedly, therefore, taxation needs to take all of this into consideration and aim to ensure that it doesn’t inadvertently create such problems that would ultimately portend a paradoxical drain on the proceeds of taxation.

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Cigarette smuggling was a huge problem until a few years ago. Today, with a handful of multinational corporations operating in Nigeria, and at least one operating a full-fledged factory, smuggling has considerably reduced. An increasingly entrenched formal industry has also placed itself under the oversight and control of government’s regulatory agencies, including the Standards Organization of Nigeria (SON) and the Consumer Protection Council (CPC). These agencies regularly inspect production facilities to ensure that products conform with globally acceptable safety standards.

Incidentally, both regulatory organizations have at different times in the last few months, raised alarm over the presence of unregistered, toxic and apparently smuggled cigarette brands into Nigeria.

Of course, it is easy to see that because there are legitimate cigarettes produced by a legitimate tobacco industry, there is a basis for comparison and raising of an alarm.

Where taxation becomes unreasonably high as to make cigarettes too expensive, consumers will naturally jettison these products in preference for the cheaper and smuggled alternatives, whether or not they are pronounced fake or toxic. We have seen this trend happen even in the United States, where, as the ECONOMIST has reported, smokers have generally jettisoned heavily taxed cigarettes sold in their states for cheaper cigarettes smuggled in from neighbouring states.

An even worse scenario in which this is likely to play out is that in the face of inability to sell their products, the legitimate manufacturers will ultimately be forced to close down shop and lay off workers, putting thousands of gainfully employed Nigerians in the labour market.

As a corollary, the considerable payments which the companies make to government in the areas of customs and excise duties as well as taxes in sundry forms will be lost. What this implies therefore, is that discriminatory taxation of the tobacco industry will only serve to destroy the sector to a point where there will be no industry to tax anymore. In its place, however, tobacco consumption will be sustained by cheaper and smuggled cigarettes.

So, while not necessarily achieving a drop in cigarette smoking, discriminatory taxation will, besides boosting smuggling, oil the wheels of organized crime and terrorism. At a time when Nigeria is in the throes of a harrowing criminal insurgency, this would be a violent paradox.

It is important at this juncture to add that the entire tobacco industry has agreed that tobacco production, sale, promotion and consumption among others need to operate within a legal and properly regulated framework.

In other words, the tobacco industry itself is one of the most aggressive advocates of tobacco regulation. What needs to happen, however, is painstaking circumspection in penning such regulation to ensure it meets public health protection objectives.

The National Assembly has so far shown great determination to tow this path of care and circumspection in drafting the tobacco control bill. It must strive to continue on this path and not be derailed by campaigns which may prove to, in the long run, be self-serving by NGOs eager to justify the subventions they receive from their foreign paymasters.

Ogunlade is of the Centre for the Promotion of Enterprise and Business Best Practice, Abuja.

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