The economics of tobacco control in Nigeria: modelling the fiscal and health effects of a tobacco excise tax change in Nigeria
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Centre for the Study of the Economics of Africa, Nigeria
The African Capacity Building Foundation, Zimbabwe
Publication date: 2018-03-01
Tob. Induc. Dis. 2018;16(Suppl 1):A694
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The study examines potential for tobacco tax to contribute to mobilizing domestic resources, and improving public health in Nigeria.

Primary and secondary data were obtained from domestic sources. Cigarette prices were collected through surveys of randomly selected retailers in six states across six geopolitical zones in Nigeria. For analyses, two tax simulations models were used: a home-grown model and the Tobacco Excise Tax Simulation Model (TETSim). Each model was run under two scenarios: Scenario 1-a 275 percentage increase in tobacco taxes, in line with WHO excise tax benchmark of 75 percent of retail price; Scenario 2 - a less stringent 150 percentage increase in line with a 50 percent benchmark.

A more stringent increase in excise tax (Scenario 1) in both models would allow for the maximization of public health and government revenue within a one year period. Under scenario 1: total cigarette consumption will fall by 19.6 percentage points (short-run) and 71.4 percentage points (long-run); 4 million people (short-run) and 11 million people (long-run) will likely quit or fail to initiate smoking; 1 million (short-run) and 4 million (long-run) of those who quit could be saved from smoking-related deaths. Under scenario 2: cigarette consumption will fall by only 12.7 percentage points, 2 million people will likely quit or fail to initiate smoking, 664,000 lives could be saved from smoking-related deaths. In terms of fiscal impact, an increase in excise tax would create a 114.5 percent increase in government revenue under scenario 1 -from approximately N1.48 billion to N3.2 billion. Under scenario 2 increase by 75.7 percent - N2.6 billion.

An effective tobacco control tax policy in Nigeria will entail a 275 percent increase in excise tax, a change in tobacco tax structure -from ad valorem to specific; and stronger tax administration and revenue-collecting agencies to yield the optimal results.

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