From: Nigerian Tribune
Perspectives on illicit trade in tobacco
Akeem Ogunlade, Centre for the Promotion of Enterprise and Business Best Practice, Abuja
***
The menace of illicit trade in tobacco is also aggravated by high taxes and stifling legislation, which often constrict legitimate tobacco business thereby pricing out poor and average income consumers of tobacco products. As a result, they resort to buying from illicit tobacco dealers. Studies have shown that smokers are more likely to search for cheaper alternatives when there is a hike in retail price of cigarette. The cheaper alternatives are mainly provided by the suppliers of the illicit or smuggled products who have avoided paying statutory duties. It amounts to a huge loss to governments, coupled with the harm that consumers are exposed to through consumption of unregulated products. Recently, the World Customs Organisation, whose members manage 98 per cent of global trade, made an interesting finding on the linkage between tax burden and illicit trade of excisable products. According to the finding, “Experience across both advanced and developing economies demonstrates that the key economic drivers influencing the illicit tobacco trade are excessive tax levels, usually resulting in a sharp decline in cigarette affordability, compounded by weak or no enforcement of existing laws and organised crime’s willingness to supply given the opportunity to gain large profits from tax avoidance.”
In the long run, the black market continues to flourish on account of high price occasioned by harsh regulation. In recent years, Standards Organisation of Nigeria (SON) has made significant progress in its efforts to combat illicit trade in tobacco by sensitising the general public on the proliferation of brands of cigarette not approved for sale in the Nigerian market. Such efforts by the regulatory bodies in the country should be scaled up in order to discourage patronage of dubious brands and rid the Nigerian market of illicit and contraband tobacco. Another way by which illicit trade in tobacco can be curtailed is by localising the production of tobacco. Localising production helps to monitor and enforce standards effectively. This also makes the local producers to be more responsible and accountable for the manner in which their products are dispensed. The task of containing the menace of illicit trade in tobacco is a collective one. No doubt, this can be achieved through full implementation of the NTCA.
