Analysing Customs’ High Revenue Generation

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Containers waiting to be loaded and shipped

With the highest revenue figure of N95.7 billion generated in August, the first in 10 years and at a period of economic recession characterised by forex crisis, the Nigeria Customs Service attributes the feat to hard work and robust policy thrust. But customs brokers and maritime lawyers think otherwise, writes Francis Ugwoke

Nigeria is currently going through recession that has affected every sector of the economy. The ipact is felt on business and to a large extent Nigerians. The nation’s maritime sector is not left out as many companies have closed down. There is no stakeholder in the industry that is not feeling the effect.

About three weeks ago, the Director-General of the Nigerian Maritime Administration and Safety Agency, Dr. Dakuku Peterside, opened up on the effect of the recession on the maritime industry. Peterside said the revenue of the agency had gone down by more than 51 per cent. Industry watchers hold the view that with 51 per cent fall in the revenue of NIMASA, the effect will equally trickle down to every other agency of government in the maritime sector. This is considering that NIMASA’s revenue is calculated on the number of vessels that call at the nation’s ports or territorial waters from which it collects three per cent levy. Although, there is no scientific proof that low ship traffic can also lead to low cargo traffic, the argument is that this cannot be ruled out, more so with the foreign exchange crisis that has affected international trade by Nigerians.

However, how much revenue that other agencies of government earn each year would also depend largely on both ship and cargo traffic. But despite the sad story from Peterside, the Nigeria Customs Service (NCS), coasted home in the month of August with a revenue generation of N95.7 billion in what has been described as the highest for the Service in the past 10 years. The figures were despite the forex crisis, which has impacted negatively on import. For the Customs Service, this called for celebration, and an opportunity to prove critics wrong that there has not been any difference or major success in the fight against corruption in the ports involving officers and men since the appointment of Col. Hameed Ali (rtd).

The August revenue figures had come shortly after the Customs declared in June that it recordedN385.7 billion which was below its expectation so far, having set a target of N1trillion for this year. But the August revenue was a consolation, and if this trend continues, the Service may get close to its target for the year.

‘Why We Performed Well’

Since the new revenue for August was released, Customs officers have attributed the development to the efforts of the CG to reposition the Service to achieve the desired result. The Public Relations Officer of the Customs, Mr. Wale Adeniyi, in a statement simply said the high revenue was as a result of the “efficacy of the Comptroller-General’s policy thrust”. Adeniyi said the high revenue showed that the strong stance of the Comptroller General on “issues of discipline, integrity and strict adherence to Customs Codes and Clearance procedures” was yielding positive results. According to the statement, the CG had been strict in the revenue collection and suppression of smuggling. Adeniyi recalled that Ali had assumed office in August last year with a presidential mandate to “Reform, Restructure and Raise revenue.”

The statement added: “To achieve these, he drew his policy thrust, which harped, on Honesty, Integrity and Transparency as bases for achieving the mandate. Starting from the Headquarters and then to all Customs formations across the Country.

“Knowing that reform and restructuring are activities within the Nigeria Customs Service, while raising the much-needed revenue requires cooperation and Compliance from the part of Stakeholders, the CGC embarked on Stakeholders visitations to secure their buy into the new way of doing business with the Service”.

Customs image makers in Lagos, who spoke to this writer, did not mince words on what led to the rise in revenue in August, exactly one year after the CG assumed office.

Mr. Chris Osunkwo and Uche Ejesieme of the Tin Can Island port Command Public Relations said the measures put in place by the Controller, Yusuf Bashar, in line with the directive of the CGC was among the reasons for high revenue yield.

Osunkwo said Bashar brought his years of experience to bear on the job, adding that to demonstrate his detest for unprocedural practices, he punishes officers who err on the job.

He disclosed that the Comptroller, in order to increase officers’ efficiency, set up a state of the art ICT in Tin Can to make the job easier. He said appropriate DNs were issued to those who deserve them to ensure that government does not suffer any revenue loss and in consonance with the CGC directive.

Similarly, Ejesieme described Bashar as an officer who is gifted with the art of putting square pegs in square holes, adding that he knows how to synchronise situation to get best results.

“What the Comptroller did was to block all areas of revenue leakages by putting officers on their toes, extracting their commitment to make sure that all areas of possible infractions are blocked. He has provided effective leadership which has resulted in effective followership in terms of deep commitment of the officers”, Ejesieme said.

Other Factors

Despite the claims of the Customs officers that the high revenue generation by the Customs in August and possibly in subsequent time was as a result of measures put in place by the Comptroller-General, many industry stakeholders hold a different view. While efforts of the Comptroller General in ensuring revenue rise could not be wished away, it was gathered that the exchange rate, the depreciating value of the Naira to the Dollar with which import duties are calculated and coercion by customs officers in the ports and border stations accounted for the high revenue. Until recently, the Customs had calculated duty on the rate of N313 per dollar as against N197 under which the importers opened their Form Ms. The Service later reduced the rate to N306, and only this week the Central Bank further brought the rate to N303 per dollar .

Former Chairman, Council for the Regulation of Freight Forwarding, CRFFN, Iju Tony Nwabunike, accused the Customs management of simply creating crisis for importers by calculating import duties outside the rate contained in the Form Ms.

Nwabunike said while the importers opened their Form Ms through the bank at the rate of N197, the Customs disregarded this to collect duties at the exchange rate of N313 per dollar. Describing the money as illegal, he said, many importers succumbed to clearing their goods at that rate because of the fear of demurrage at the ports. “The customs is strangulating importers with such policy. If government does not want Form M, why not tell importers so that they will do Destination Inspection. How can you tell somebody to open Form M, and when this is done, you disregard it and calculate duty on different rate. This is uncalled for. And this explains why there is so much suffering, because when the importer clears the goods, he must calculate all his expenses to make profit,” he said. He also added that the resultant effect had been that many importers find it difficult selling those goods because of high cost.

“Go to the warehouse and markets, nobody is buying”, he said.

A retired customs officer and maritime lawyer, Chinedu Ogbonna, who spoke to this writer also expressed dismay about the rate being used by the Customs to calculate duty instead of what is on Form M. He gave an indication that this was the major reason why the customs revenue rose. He painted a scenario: “Under the existing laws, the correct and applicable rule for calculation of customs duty transaction value which can be verified is the date the Form M was opened, date of contract of sales, the shipment and arrival dates of the goods in question. Unfortunately, it may not be a level playing field for all the importers with the collapse in the exchange rate regime.

The Nigeria Customs Service naturally configured their system to the recent exchange rate and this shut out all the transactions concluded before the collapse of the foreign exchange window. Thus, where goods were bought and sold at a transactional value of $50,000 CIF at N197 which will give you about N9,800,000, the same $50, 000 CIF will now be calculated at the exchange rate of N306”. Ogbonna said that by implication, the customs was robbing Nigerians, who now suffer because of the high cost of living, adding that when an importer spends so much to import, he must as well try to recover what he has lost to the Customs. Ogbonna, who described the tariff regime as a fiscal policy tool with a multiplier effect on the entire economy when properly engaged, said it will stimulate confidence on economic participation.

He faulted the present tariff regime, saying it did not pass through the National Assembly and was never part of the 2016 appropriation bill to have the force of legitimacy, even though, he said, there were copies that could be seen with the signature of the President.

Former President of the National Association of Government Approved Freight Forwarders (NAGAFF), Dr. Eugene Nweke, gave a clear view of the factors behind the rise in Customs revenue.

Nweke said it was a combination of factors, including “in-depth scrutinisation of imports, appreciable export activities and most importantly the CBN directive to the NCS in the month of July as part of its monetary policy instrument through a circular to bench its foreign exchange rate for all imports payable duty calibrations to the prevailing exchange rate and not at the exchange rate at which the shippers opened their form M”.

Nweke added that, “By implication, most of the Form M opened from January to June were at the exchange rate of N197/$1, with which transaction was concluded upon. All the imports arrived into the country to be greeted with a circular jettisoning their transactional exchange rate of N197/$1 to first N298/$1, to N303/$1 and N313/$1. This skyrocketed the CIF base of all imports, thereby boosting the revenue generation as witnessed.”

Noting that the Customs was doing its best as an enforcement arm of the government on revenue generation, Nweke however cautioned that “a sensitive government must draw distinction between exploitation and taxation”, adding that the impact of such insensitivity could only be imagined by the crises in the national economy.