Stakeholders Canvass Benchmarking of Customs Duty Assessment Rate


Piles of containers at a Lagos port

Shippers and customs brokers are seeking a possible benchmarking of forex rate for customs duty assessment, reports Francis Ugwoke

The foreign exchange challenge in the economy is far-reaching. The excruciating effect is not sparing anyone, from small businesses to big businesses and of course from the low income earners to the rich. Even the federal government is not left out as its revenue target in various sectors of the national economy is far from being met. When it became clear that oil revenue was on the downside, many had looked on to the maritime sector as the only hope. But the situation in the sector has dashed this expectation of the government and indeed stakeholders, who had said as much as N7 trillion could be realised from the sector annually.

Perhaps, it was as a result of this that the Minister of Transportation, Rotimi Amaechi, had months after his appointment given the Nigerian Ports Authority (NPA) and the Nigerian Maritime Administration and Safety Agency (NIMASA), an annual revenue target of N500 billion each. The Comptroller-General of the Nigeria Customs Service, Col. Hameed Ali (rtd), had also set a revenue target of N1.2 trillion this year for the service. So far, both Amaechi and Ali may have realised that their targets could not be achieved under the current economic crisis in which sourcing foreign exchange to import goods has become a herculean task.

Customs and Forex Regime

The reaction of the federal government to the fluctuation of the foreign exchange has made international trade very difficult. The government had directed the Customs Service to calculate import duty on the prevailing exchange rate. The rate at which the importer sourced the foreign exchange to buy his goods may not matter.

The circular which was signed by the Deputy Comptroller-General, Tariff and Trade, Nigeria Customs Service, A. Adewuyi, read: “In consonance with the provisions of CEMA on the evaluation and clearing of imported goods into the country, Mr. President has approved the use of the exchange rate at the time of making entry as provided in CEMA, Customs and Excise Notice No.13 on the value of imported goods. Where the value of an imported good is shown in foreign currency, such value is to be converted to the equivalent Nigerian currency as at the rate at the time of making entry. The current rates of exchange are published at the Customs House.”

Before the new policy, the duties were calculated at the exchange rate of N197 per dollar and later at N282. But now, importers whose goods are in the ports will have them calculated at the prevailing rate. The sad side of this development is that many importers, particularly those affected by the CBN position on the 41 items list, who source their foreign exchange from the parallel market, are on their own.

This is one of the reasons why trade has become difficult with the attendant result of high prices of goods in the market. While it could be argued that the fluctuation may favour some importers at a stage, it is not all smiles, because a trader who pays for his goods at any prevailing rate of the dollar may be hit when the rate goes down. His competitor may buy the same goods cheaper and therefore sell cheaper. That has been the problem affecting many, who are into importation. This was the fear of many importers who had at a stage put a hold on importation.

An importer of trade goods, Uche Mba, who spoke to THISDAY said that fluctuation in exchange rate affects importers as they become uncertain what the market rate would be next. “If the rate comes down when the importer had sourced forex at high rate, it will be a loss for him as it will be difficult for him to sell such goods and make profit based on the exchange rate”, he said. According to him, every international trader is usually careful not to import when there is uncertainty of what the exchange rate would be.

Protest by Customs Brokers

Following the increase in import duty occasioned by the foreign exchange rate, customs brokers and freight forwarders have threatened to shut down the ports. Those who made the move were members of the Association of Nigerian Licensed Customs Agents (ANLCA). But the Nigerian Shippers’ Council (NSC) intervened by stopping the customs brokers from shutting the ports. Such action by the customs brokers or freight forwarders would not be the best for the national economy, the Council said. It was gathered that the Executive Secretary, NSC, Mr. Hassan Bello, who held series of meetings with the customs brokers and freight forwarders associations to stop them from shutting the ports may be meeting relevant authorities on benchmarking of forex for import duty assessment by the Customs. Reacting to the development, the President of ANLCA, Olayiwola Shittu, said that it was not for the customs brokers to protest but the importers.

Shittu was quoted saying that as far as he was concerned, customs brokers were simply intermediary. He, instead, called on importers to organise themselves and protest to the federal government.

Pointing out that the new rate at which Customs will calculate duty will affect importers, Shittu appealed to the Customs leadership to adopt a holistic approach in the evaluation of duty. In his view, Customs should be able to let importers know what exchange rate they will be using as benchmark for duty payment.

According to him, a situation whereby after paying for duties, importers are stopped at the point of release on the excuse that another rate of duty was released, would not be acceptable.

A maritime lawyer and trade expert, Emma Ofomata, while reacting to the foreign exchange issue said it had hit everybody in Nigeria. Ofomata said it did not matter what one does, the effect was being felt by everyone because of the economic hardship it had brought to the country. According to him, it has reduced the volume of trade into the country. “Those who used to import as much as 40 containers in a month can no longer do so. At best, they bring in 20 because of the rate of exchange”, he said. Ofomata pointed out that manufacturers were the ones affected more than the importers of finished goods, explaining that while the manufacturer suffers the effect of forex regime, he also has to battle with the problem of power as he has to buy diesel at probably N200 per litre. He said at the end, the consumer would be the one who will take the whole shock as the importer or manufacturer has to recover all the cost to be in the market.

Way Forward

As part of the solution to the problem, the Publicity Secretary of NAGAFF, Stanley Ezenga, said the CBN and the Finance Ministry should consider benchmarking the exchange rate for import duty for the interest of Nigerians. He said this will save the importers the nightmare they have been suffering as a result of the fluctuation of exchange rate.

According to him, “we indeed advise that the Minister of Finance in consultation with the CBN Governor can benchmark the exchange rate for Customs duty purposes. It is legal and legitimate in favour of trade and the society in Nigeria.”