Beyond the suspension of 4% import levy

The suspension of the implementation of the controversial 4 percent Free-on-Board (FOB) charge on imports by the Nigeria Customs Services (NCS) is commendable. The suspension of the planned levy shows that the federal government is aware of the concerns of stakeholders in the import/export value chain of the economy. In a statement by its public relations office, the agency said the decision to halt the implementation of the levy was to enable ongoing consultations with the Finance Ministry, trade experts, and other business groups, as well as to allow for a comprehensive review of its revenue framework. 

The 4% FOB charge is calculated based on the value of goods at the point of export. It excludes shipping and insurance costs, which were introduced under Section 18(1)(a) of the Nigeria Customs Service Act 2023. This provision was intended to replace the 1% Comprehensive Import Supervision Scheme (CISS). According to the NCS statement, the transition period sequel to the suspension of the new charge will allow the agency to optimise the management of these frameworks to service its stakeholders and the nation’s interest better. The NCS 2023 Act specifically grants the organisation powers to modernise its operations through technology. 

For example, under Section 28 of the Act, the NCS is mandated to develop electronic systems for information exchange, while other provisions support the implementation of the national single window, non-intrusive inspection equipment and enhanced risk management. We advise that the ongoing consultations should be all-inclusive and factor in the multiple challenges facing stakeholders. The manufacturing sector has been experiencing hardship that has resulted in shutdowns and job losses. Concerted efforts should be made through concrete policies to strengthen the various key sectors of the economy.   

According to data from the Nigerian Shipper’s Council, Nigerian importers have of late been diverting their cargoes to Togo, Benin Republic and Ghana due to multiple and soaring taxation of over 100 percent across Nigerian ports, which is 40 per cent higher than ports in neighbouring West African countries. According to port operators, the high charges hamper efficiency of imports. It has also raised cargo clearance above the reach of most operators. Statistics show that as a result of these new charges, some ports in the country have in recent months witnessed significant decline in cargo operations as a result of the diversion of cargoes to neighbouring countries. This has adversely affected the ease of doing business in the country. 

The Nigerian Ports Authority (NPA) recently increased all ports rates and levies and tariffs from 7 per cent to 15 per cent, representing over 100 per cent hike. Government should direct its agencies in the maritime sector to suspend forthwith charges that may hamper exports and imports. According to licensed Clearing Agents Association of Nigeria, other levies are being contemplated on imports. These include an upward review of the N500,000 charge importers pay to the Standards Organisation of Nigeria (SON), the National Agency for Food and Drug Administration and Control (NAFDAC) certification, the National Environmental Standards and Regulatory Enforcement Agency(NESREA), and other environmental agencies at the ports. These charges range from N150,000 to N200,000. 

Clearly, had the Nigeria Customs Service gone ahead to implement the 4 per cent charge on imports, it would have had far-reaching implications for industries importing raw materials. That would have entailed additional 80 per cent of the duty paid as “administrative fees” before importers’ goods are released to them. The total cost will be pushed to the final consumers who are already at the receiving end of government policies. According to data, charge on a 40-foot container has since January this year risen from N20million to over N26million, while that of a 10-ft container has doubled from N10.5million to N20million. 

To make Nigeria the preferred destination for investors, the nation’s business climate should be friendlier. Currently, Nigeria’s economic climate has been strained by high inflation, soaring interest rates, foreign exchange volatility, and declining Industrial capacity utilisation, with many businesses struggling with unsustainable operating costs, surging energy prices and general economic uncertainty. As a result of this, Nigeria is losing the competitive edge in business. It is estimated that the cost of doing business at Nigerian ports is 40 per cent higher than in other West African countries. The escalating cost is making it increasingly difficult for importers to break even. That trend should be reversed to encourage investment inflows to the country.