More on the Positive Fiscal and Health Effects of Increasing Tobacco Taxes in Nigeria

Authors: Corné van Walbeek, Adedeji Adeniran & Iraoya Augustine
Publisher: ICTD
Date: June 2021

Abstract:

African Tax Administration Paper 25

Nigeria is faced with substantial economic and health burdens caused by tobacco smoking. The economic burden of smoking accounts for approximately 1.3 per cent of Nigeria’s GDP. In terms of its health impact, 4.9 per cent of all deaths in 2019 were attributed to smoking related diseases.

The thousands of Nigerians that die annually from tobacco-induced diseases are no longer able to contribute productively to the economy. Tobacco taxation is one very effective mechanism for reducing the burden of smoking.

This paper measures and benchmarks the economic gains and the number of lives that could be saved through increased tobacco taxation in Nigeria. Should the government of Nigeria increase the excise tax to 240 Naira per pack (together with an ad valorem tax of 50 per cent of the CIF/ex-works price), our model predicts that, over 30 years, nearly 150,000 premature deaths could be avoided. This is in addition to the more than 150 per cent increase in government revenue that would also result.

The model indicates that the larger the increase in the excise tax, the greater would be its fiscal and public health impact.