The Nigeria case: trying to fight illicit trade with regulation

The Economics of Tobacco Control in Nigeria: Fostering Effective Tobacco Control Policy Implementation in Nigeria

The apparent difficulty in implementing tobacco control measures in Nigeria is due in part to strong lobbying from the tobacco industry, who peddle false claims about the severity of the impact of tobacco control policies on employment and the economy. This strategy has proven effective in many low- and middle-income countries due to scarce research evidence to refute misleading claims.

This research provides detailed knowledge and recommendations to inform governments and stakeholders about the effectiveness of policies and how to properly formulate regulations to have a positive effect on public health.

*Disability-adjusted life year: The disability-adjusted life year is a measure of overall disease burden, expressed as the number of years lost due to ill-health, disability or early death.

The Nigerian example: how an insufficient taxation rate can dilute the potential impact of pro-health policies.

The realities of the tobacco industry in Nigeria. A need for market regularization in terms of both imposition and production levels.

Nigeria is a key market for the tobacco industry in Africa because of its large population and access to other markets in the region. With the federal government providing financial incentives, British American Tobacco built a USD150 million manufacturing facility in Nigeria to serve the West African countries, conferring it with a near monopoly status. Further, the state has little control over production and border controls are weak in many areas.

Big demand leads to high levels of production, but when not handled properly, things can go wayward.

In Nigeria, a total of 17.53 billion cigarettes were produced in 2016, of which 3.3% were exported.

Similarly, it is estimated that annual demand for cigarettes in Nigeria was 22.76 billion cigarettes over the same period. The demand is estimated based on the number of daily smokers in Nigeria (7,638,000 daily) who smoke an average of 8.3 cigarettes per day (2012). This places the total demand at 23.1 billion cigarettes yearly.

Accounting for net exports, this estimation leads to unexplained surplus, interpreted as the size of the illicit tobacco trade, representing over 6 billion cigarettes consumed annually (26.3% of total consumption).

When implementing a tax, ensure that the amount is sufficient.

A new tax policy introduced by Nigeria in 2018 amounted to 16.4% of the overall tax burden, which is still significantly lower than the 75% excise tax burden on tobacco products recommended by the WHO.

Increasing tobacco taxes should lead to an increased cigarette price in order to impact consumers. However, the actual price of the most popular cigarette in Nigeria, manufactured by British American Tobacco (BAT), has in fact declined in both rural and urban areas since the start of the new tax regime.

In short, the tax did not have the intended effect.

Team and partners list

Chukwuka Onyekwena, MSc, PhD (Lead Researcher), Executive Director, Centre for the Study of the Economies of Africa (CSEA), Abuja, Nigeria.

Methodology and references

This research presents estimates of the direct costs associated with tobacco-related diseases and the indirect costs of tobacco-related illnesses, which were previously unavailable in the country.

CSEA ran analyses that streamlined the messaging of these studies to suit the Nigerian setting. Survey data was analyzed using Coefficient of Variation** (CV) methods.

CSEA also produced a research note on the cost-effectiveness of measures aimed at curbing the illicit trade in tobacco products. A cost-benefit analysis was used to compare the different systems of monitoring tobacco products, including the Codentify*** system. This formed the basis for implementing an effective track-and-trace system in Nigeria.

**In probability theory and statistics, the coefficient of variation, also known as relative standard deviation, is a standardized measure of dispersion of a probability distribution or frequency distribution.

***The Codentify system is based on a machine-created, unique, human-readable multi-digit alphanumeric code that is printed directly onto every individual product during the manufacturing process. A double key encryption system, with separate central authority level and factory level encryption keys are stored on different servers, allowing for factory line production of a pre-defined number of Codentify codes that have been authorized by a central (e.g., government) server.

Promoting key learnings

Celebrating the culmination of over a decade of partnerships, research and advocacy, a webinar was planned in partnership with Cancer Research UK, “Demystifying the Economics of Tobacco Control: Knowledge, policy and everything in between,” and broadcast live on June 29, 2022.

This webinar represented an opportunity to demystify the process of knowledge translation, to share key learnings from our research teams across the globe and to discuss the emerging opportunities for continued and meaningful impact.

ETCRI Funding

The Call for Concept Notes on the Economics of Tobacco Control in Low and Middle- Income Countries offered up to CAD1 million over a maximum of four years to support evidence-based research on the economic rationale for the adoption of tobacco-control policies across LMICs in four regions: Asia, Latin America and the Caribbean, the Middle East and North Africa, and sub-Saharan Africa.

By targeting collaborative, applied economics research, the Initiative aimed to support the implementation of effective fiscal and other policy measures to help prevent tobacco-related diseases and save lives.