Consumer demand analysis of sugar-sweetened beverages in Nigeria

Abstract

Sugar-sweetened beverages (SSB) represent a leading public health concern worldwide and the World Health Organization recommends for fiscal approach, by raising prices through taxation to discourage the consumption of SSB. This study was conducted to explain the consumer demand for sugar-sweetened beverages in Nigeria. The key objective of the study is to estimate expenditure and price elasticity of demand as a first and necessary step to assess the impact of the sugar tax. Data from the 2018-2019 National Living Standard Survey (NLSS), which contains detailed information on household food and beverage consumption as well as socio-economic variables was used. The Quadratic Almost Ideal Demand System was employed for estimation. The expenditure elasticity results revealed all non-alcoholic beverages to be normal goods, sachet water is categorised as a necessity, while bottled water and all sugary drinks were revealed to be luxury beverages. Own-price elasticity for all beverages was revealed to be greater than a unit (in absolute terms), implying that the beverages are price elastic. For SSB, malt drinks and soft drinks had higher elasticity estimates of -3.21 and -2.10 respectively. Also, substitutability was observed between SSBs and sachet water. These results show that demand for SSB is price-sensitive and the effective implementation SSB- tax has the potential to discouraging consumption of SSB in Nigeria.