Between Customs and Rice Smuggling Cartel

0

Eromosele Abiodun posits that claims by the Nigeria Customs Service that it is fighting rice smugglers may not be entirely true as recent investigations have revealed that some customs officials are actually accomplices

Last week, THISDAY reported that rice worth over $3billion destined for the Nigerian markets were stuck in various warehouses in Benin Republic due to federal government’s refusal to allow its importation through land borders and fierce customs anti-smuggling drive. The report has elicited reactions from concerned Nigerians, who have urged the Comptroller General of Customs, Ahmadu Ali (rtd) to take urgent steps to curb illicit activities of his men and officers at the various borders.

Sources at the Seme border told THISDAY that contrary to claims that these Customs officials are waging war against smuggling, they “actually aide smuggling and only arrest a few persons who could not meet their demands”. A Nigerian, who resides in Benin Republic and imports rice into Nigeria, told THISDAY that the Nigerian Customs Service (NCS) officers posted to checkmate smuggling are their accomplices.

According to the women, who did not want her name in print, “Customs claims that they are fighting smugglers or smuggling are not correct. Go there and do a private investigation. They collect between N2000 and N4000 as bribe, for a bag of rice. People, who can afford it, don’t have any problem as they are allowed to go with their goods. But those who cannot afford it or try to play smart game with them are often arrested and paraded before the press as smugglers.

She said: The only language these corrupt officials understand is money. The quantity of rice that comes into Nigeria through the land borders illegally is huge and could even be more than what comes in through legal means. The federal government should set up a combined special task force to man our borders. This is the only way to curb the menace of these corrupt customs personnel.”

Customs Clash with Police, Smugglers
Only last week, some yet-to-be identified operatives of the NCS reportedly shot three people dead at the Alakuko area of Lagos State.

According to the report, after shooting the three persons while allegedly chasing some suspected smugglers, the operatives then clashed with some policemen who wanted to arrest them.

It was gathered that the Customs officers, who were from the Federal Operation Unit (FOU), were chasing the suspected smugglers conveying rice, when they shot at the vehicle, killing three persons. When alerted, policemen from the Alakuko Division were said to have attempted to apprehend the customs officers, who shot sporadically to scare away the police and other passers-by, who tried to arrest them.

When they successfully evaded arrest, sympathisers and onlookers were said to have taken to the streets in protest. However, hoodlums hijacked the protest and started molesting motorists and passers-by, with windows of some vehicles smashed. The incident, coupled with the protest, expectedly caused a major traffic gridlock along the Lagos-Abeokuta Expressway as the hoodlums barricaded the road. A witness, John Ogbu, said: “It was around 7a.m. while I was standing in front of my shop to observe the sanitation, two vehicles drove recklessly as they were being pursued by a customs patrol vehicle. The custom officials were firing at the vehicles and the passers-by were hit by stray bullets.

I also saw some policemen trying to block the Customs from escaping and there was an exchange of gun fire between the operatives.”

Meanwhile, a senior Customs official, who spoke on the condition of anonymity said: “We were doing our job of arresting some rice smugglers and the police jumped into the fray by aiding and abating them. In the process, there was a shootout between us. I can’t say what transpired, three persons were shot. I cannot say who fired the shot but all I can say is that we were doing a legitimate job when the police obstructed us.”

Confirming the incident, the state Police Public Relations Officer, Dolapo Badmos, however said only one person was allegedly shot dead by the Customs. She said: “What happened was that this morning, at about 7a.m., some Customs officials were on the trail of a vehicle, in the process, they went berserk and started shooting and killed one Saheed Omotosho.

His brother Rasheed was taken away to an unknown destination. The identity of the Custom men is not known. The Divisional Police Officer (DPO) of Alakuko mobilised his team to the scene to maintain peace.”

However, the spokesman for FOU, Jerry Attah, an Assistant Superintendent of Customs (ASC) said: “We have no problems with the police. It was a problem between smugglers and the customs officers. We have arrested one suspect and the exhibits are with us.” Although there are was still palpable tension in the area as at press time, the operatives of the Rapid Response Squad (RRS), led by its commander, Tunji Disu, and policemen from Alakuko Division were still at the scene to maintain law and order.

$3 Billion Nigeria Bound Rice
THISDAY had reported that Rice worth over $3 billion meant for the Nigerian markets were stuck in various warehouses in Benin Republic due to the federal government’s policy banning importation of the commodity through land borders.

THISDAY findings revealed that the annual routine of importing rice into the neighbouring countries from July to December to make massive sales in Nigeria during yuletide has hit a brickwall as the Comptroller General of the Nigerian Customs Service (NCS), Col. Hameed Ali (rtd) has insisted that his men tighten the borders.

Nigeria shares major borders with Benin Republic at Seme Border (Lagos), Idiroko (Ogun State), Shaki (Oyo State),Chikanda (Kwara State) and other smaller openings. Prominent among them is Seme where the highest volume of trade and largest smuggling opportunity exists because of its easier access to Lagos, Nigeria’s commercial capital city.

Seme border, which hitherto was a major transit point for foreign rice importation and smuggling also became a no go area for the commodity as almost daily seizures of 50kg bags of it have taken a good portion of the government warehouse .

A competent source in Benin told THISDAY that most of the warehouses where the bagged rice were kept before shipment into the country are now battling for space.
According to the source, who does not want his name in print, “some consignments of imported rice into the small West African country that had no space at the usual and popular stores were moved to makeshift storage areas and are exposed to rains, weevils and other unhygienic forms of storage.

The source said: “Popular warehouses no longer receive rice shipments as thousands of bags earlier delivered to them since July could not be evacuated into Nigeria as planned and as the usual case in previous years. Popular Cherika warehouse in Akpakpa near Cotonou with a capacity to hold 25,000 bags is fully loaded with Thailand rice with no hope of evacuating them into Nigeria except government relaxes its policy disallowing rice imports through border or customs softening their round the clock enforcement in Seme.

“Defezi warehouse close to the Cotonou Port with is filled with over 40,000 units of 50kg bags of Indian and Thailand rice. Defezi got occupied earlier due to its proximity to the port but was not evacuated as the owners could not risk entering Nigeria with it. Cica warehouse in Missebo area of the Cotonou outskirts that suffered lack of patronage in the past due to distance from Seme border and bad road presently have over 15,000 bags. Some are getting moulded, caked with their bags torn and quantity reduced while under storage in several odd arrangements endlessly awaiting shipment into Nigeria.”

THISDAY checks revealed that while hope of smuggling them into Nigeria gets dim by the day, there is a conscious efforts at attempting the smuggling of the commodity without using bags.
The unwholesome methods, our findings revealed, require pouring grains of rice into various compartments of vehicles like the booths, bonnets, inner part of the doors, under the seats and other spaces meant for spare tyres and tools.

Sources disclosed that attempts to try bringing in some hundreds of bags failed as the smuggling bags ended up inside the customs warehouse in Seme and Idiroko as seizures.
The seized rice, some of which are closed to expiring and unwholesome for human consumption have become bad and unqualified for donation to Internally Displaced Persons (IDP) camps as was done in the recent past.
Numbers made available by the NCS revealed that over 37,000 bags of rice have so far been seized in Seme and Idiroko between January and September 2016 with a recent clamp down on 13 vehicles at a go in the Ogun State area all laden with smuggled rice.

Nigeria Customs had in an October 2016 press statement reiterated government’s ban on rice importation through the borders. The statement signed by customs spokesman, Wale Adeniyi, reinforced its resolve to protect government’s attempt to improve local rice capacity.

According to him, ”We like to reiterate the position that importation of Rice remains banned through our land borders, and we have the commitment of partner government agencies and stakeholders to enforce this restriction. While this restriction is in force, Rice imports through the Ports are still allowed subject to payment of extant charges.”

“It is equally important to restate the confidence of the NCS in the ability of Nigerian rice producers to fill the existing sufficiency gaps in the supply of the product. The Service has noted with satisfaction the ongoing rice revolution undertaken by many state governments, and strategic interventions by federal government agencies. The service is convinced that the bumper harvests expected from these efforts will address the supply gap in 2017. It is our belief that continuous waste of scarce forex on a commodity that can be produced locally makes no economic sense, most especially at a period of recession. The Service will therefore advocate a total Ban on Rice Importation into Nigeria with effect from 2017. There are loud cries in Benin over what is going on at Seme and other borders.

A respondent simply identified as Mr. Sewanu said things have taken a turn for the worse as their opportunities tied to bringing rice into Nigeria have stalled. You can see we are idle here because rice is not entering Nigeria through Seme border. We can’t work. Each day we come here, it is in prayer that the customs should cooperate with our bosses so we can have jobs to do to survive.

“By this time of previous years, thousands of bags of rice enter Nigeria from here and more ships will be discharging at the Cotonou Port on daily basis. But this year is different, nothing is working. Seme Customs people have spoiled the business for us. We don’t want to take the risk of transporting rice through any other border because Lagos is the largest market. Once you enter through Seme, you are already in the market. If this continues, we may die of hunger. Benin customs in Krake cooperate with us but the Customs in Nigeria are our only headache. We want the Controller removed. He is making things difficult.”

Impact of Smuggling

Smuggling severely harms the economy of a country in multidimensional ways. It undermines the local industry, discourages legal imports and reduces the volume of revenues collected from duties and levies by the state. Unfortunately a parallel underground economy has taken roots in Nigeria.

A major proportion of the revenue to be collected by the federal government is being lost, over and above the adverse impact that the smuggled items cause to local industry. Obviously this cannot be done without connivance of the corrupt officials including those in the law enforcement agencies and everyone is aware of it but no action is being taken.

Markets and shops across the country are flooded with smuggled goods of any and all descriptions. Smuggled items through the Seme, Idiroko, Katsina, and Yobe borders form a major part of the informal economy volume of which ranges between 50 to 60 per cent of the formal economy. Smuggling has assumed an alarming proportion and turned out to be a parallel economy, which is depriving the country of its rightful levies including excise and customs duty worth hundreds of billions of naira.

As a result of the activities of smugglers, thousands of industrial units have been rendered sick, due to the availability of smuggled goods in open markets. Smuggling has now become a routine part of all economic activities in Nigeria which hardly raises any eye brows nor stirs the slightest fear of the law. Nigeria is facing the challenge of measuring and countering enormous revenue leakages and black money — its size estimated to be three time the regular economy.

Illegal Importation of Goods

Meanwhile, a report by the World Bank on the level of illegal importation of goods into Nigeria from neighbouring Benin Republic and other West African countries showed the alarming rate of smuggling and the impact on the nation’s economy.

Experts believe this should be a major concern to the federal government and the agencies responsible for management of the nation’s economy. According to the World Bank, an astonishing $5 billion (N1.45 trillion) worth of assorted goods are smuggled into Nigeria through Benin Republic alone every year.

This amount represents about 15 per cent of total smuggled goods through that border. The World Bank report also claims it has enough evidence that over $400 million (N116 billion) representing about 25 per cent of the total current annual revenue collected by the Customs Service is lost through nefarious smuggling across the sub-regional borders.

The report, which was prepared by two of the World Bank’s leading experts on the African Transport Unit, also noted that smuggling into Nigeria will further hamper the operational efficiency of the Customs service and cause more revenue losses if urgent steps are not taken by government to tackle it. It advised a liberalisation of trade policies which encourage smuggling across the borders.
Experts told THISDAY that the report is troubling but not surprising, considering the increasing rate of smuggling across our borders, especially along the Benin republic axis.

“A combination of factors account for this unhealthy trend. One of them is the high cost of clearing goods in our ports and the laxity of enforcement of anti-smuggling laws by those charged with responsibility in the country. It is not unkind to say that the integrity of some of the customs and immigration officials statutorily charged with policing our borders is suspect.

Many compromise their positions. Bad eggs among them are more concerned with lining their own pockets than checking smuggling activities, thereby denying government much-needed revenue.
“Therefore, the World Bank report should not be ignored. It should be treated as a wake-up call to address systemic difficulties in checking smuggling through the Benin Republic borders, and others in the region. In this regard, information exchange is vital. This has become crucial because available statistics reveal that 13 per cent of traffic of goods from the port in Cotonou, the capital of Benin Republic, is destined for Nigeria, while about 75 per cent of the containers that land at the Cotonou Port are headed for our country.

“We also believe that the current rate of smuggling through the West African sub-region is encouraged by tariff differentials. This has made it more economically viable for importers to patronise other ports in the sub-region rather than Nigerian ports. Government should seriously look into the problem with a view to formulating better policies to redress the situation, “said a top player in the maritime sector who do not want his name in print.

He added, “Also, government should take a hard look at some of the treaties of the Economic Community of West African States (ECOWAS). Some of these treaties encourage free movement of people without addressing its harmful effects. Often, this freedom of movement undermines the economy of other countries through unbridled smuggling of goods.

“All in all, the World Bank report should be seen as a roadmap for designing new strategies for our country’s trade policy initiatives with neighbouring countries. This is crucial because inability to adequately check smuggling into Nigeria can undermine both national and economic security of the country, with attendant broad political implications.”

Mis-invoicing of International Trade

It is not just smuggling that is destroying developing economies. Terrorism, human trafficking, and drug smuggling have long painted a gritty picture of crime in the developing world. However, new details are coming to light about another much less visible form of crime and its adverse effects on developing countries. Fraudulent financial transactions, in particular the mis-invoicing of international trade transactions, are having a significant impact on most African economies.
According to a report published by Global Financial Integrity (GFI) on mis-invoicing and the impact of revenue loss, the mis-invoicing of international trade transactions has allowed for the fraudulent movement of at least $60.8 billion in and out of the five African countries alone between 2002 and 2011.
Mis-invoicing is a form of trade-based money laundering that includes the over and understatement of import and export values on official forms and records. Firms engaging in international trade in developing countries often conduct these fraudulent transactions in order to evade tariffs and taxes, collect additional export-related tax credits and subsidies, or move large amounts of capital in and out of countries illegally.

Mis-invoicing can typically be as simple as altering the values on the books for a given transaction. For example, a firm may understate the value of an import shipment in invoices and records in order to pay lower tariffs or overstate the value of an export shipment in order to gain more export credits and subsidies than the shipment actually earned.

Experts believe catching those that engage in misinvoicing is typically difficult for developing countries.
“Often times misinvoicing can be performed effectively by making very small augmentations to the prices of common goods. If a firm augments the value of its goods by only one or two dollars per unit, even the best customs officers would be unlikely to notice it, and the benefits of such an augmentation could still add up significantly in large volumes.

“However, this is only trade misinvoicing in its mildest form. In many cases, firms engaging in misinvoicing and other forms of money laundering send their transactions through anonymous shell companies in tax havens and developed countries in order to further disguise their activities, allowing them to augment values much more as the important details of the transactions disappear without a trace behind a shield of secrecy and anonymity, “said National President of the National Council of Managing Directors of Licensed Customs Agents (NCMDLCA), Lucky Amiwero.