Effect of price and income on the demand for sugar-sweetened beverages in Nigeria: an analysis of household consumption data using an almost ideal demand system (AIDS)

Abstract

ObjectivesTo estimate the own-price, cross-price and income elasticities for carbonated soft drinks (CSDs), malt drinks, chocolate powder, sachet water and sugar in Nigeria. These elasticities can be used to estimate the potential demand response to the recently-introduced sugar tax in Nigeria.SettingThe study uses household data from the 2018/2019 Nigeria Living Standards Survey (NLSS).ParticipantsThe NLSS is a national household survey. 21 114 households were included in the final sample for this analysis.Primary and secondary outcomesWe used Deaton’s almost ideal demand system, which controls for the goods’ quality, to estimate the effect of price and income changes on the demand for CSDs, chocolate powder, malt drinks, sachet water and sugar.ResultsWe found that the own-price elasticity (ordered from most to least price-responsive) was −0.99 (p<0.01) for sachet water, −0.76 (p<0.01) for CSDs, –0.72 (p<0.01) for chocolate powder, −0.62 (p<0.01) for sugar and –0.19 (p<0.01) for malt drinks. The cross-price elasticities indicate that malt drinks and chocolate powders are substitutes of CSDs. The income elasticities indicate that all the commodities are normal goods. Sachet water had the highest income elasticity at 0.62 (p<0.01), followed by chocolate powder at 0.54 (p<0.01), CSDs at 0.47 (p<0.01), malt drinks at 0.43 (p<0.01) and sugar at 0.13 (p<0.01).ConclusionEven though the price elasticities for CSDs, malt drinks and chocolate powder are less than one, in absolute terms, they are significantly different from zero. Increases in the sugar-sweetened beverage tax could curb the demand for these beverages, and, in turn, reduce the incidence and prevalence of sugar-attributable diseases.