Appraising FG Duties’ on Luxury Items, Consumables

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A yacht sailing on Nigerian waters

Stakeholders in the maritime industry, who see nothing wrong in introducing high duties on luxury items, however argue that government needs to reduce duties on other essential goods to check rising prices, improve on its foreign exchange policy, if it hopes to generate high revenue from the sector, writes Francis Ugwoke

At a period of economic recession, the federal government is no doubt exploring new revenue options for the country. Perhaps, the nation’s maritime industry is one. This is even more so with many adjudging maritime as next to oil in terms of revenue generation. This explains why the Transportation Minister, Rotimi Amaechi, on assuming office gave a revenue target of N500 billion each to the Nigerian Ports Authority (NPA) and the Nigerian Maritime Administration and Safety Agency (NIMASA). The revenue target was for last year.

The minister had threatened that any of the chief executives, who failed to meet the target would not be spared. But it appeared that the minister soon realised he goofed with the revenue target. First reason was that the entire economy was on recession and the worst hit was the maritime industry where the foreign exchange policy of the Central Bank of Nigeria (CBN) did not favour the sector. So, the minister later relaxed his order.

He, indeed, had no choice considering the total revenue generation of the Nigeria Customs Service (NCS), which spoke volumes of what should be expected from the two agencies. The customs generated about N898.67 billion for the whole year as against its target of N1trillion. The service had recorded N903 billion for 2015. The Comptroller-General of the Service, Col Hameed Ali (rtd), had made it clear that the prevailing CBN policy on forex as it affects importers on 41 items list was responsible for the inability of the Customs to meet its revenue target. Ali knew that the N898.67 billion would not have been possible if not for the high exchange rate at which duties were calculated by the Customs. One is not sure of how much revenue both NPA and NIMASA recorded last year.

However, this year, it appears to be the turn of the Finance Ministry, which has raised duties on luxury items, consumables and others. This is expected to increase revenue generation from the maritime sector this year. Yet, many industry stakeholders believe that this may be a miscalculation on the part of government, except on luxury goods.

High Duties on Luxury Goods

Towards the end of last year, the finance ministry issued circular raising duties on luxury goods, including yachts, sport utility vehicles, alcoholic spirits, beverages and tobacco from 20 per cent to 60 per cent. Rice, salt and sugar cane were also affected. Import duty for sugar cane and salt went up from 10 per cent to 70 per cent; alcoholic spirit, beverages and tobacco from 20 per cent to 60 per cent; rice from 10 per cent to 60 per cent, packaged cement – from 10 per cent to 50 per cent; cotton/ fabrics materials- from 35 per cent to 45 per cent, used cars – from 10 per cent to 35 per cent. Also affected were medicaments, such as anti-malarial and anti-biotic drugs; crude palm oil; wheat flour; tomatoes paste; and cassava products.

The announcement had come from the Finance Minister, Mrs Kemi Adeosun, who said that President Muhammadu Buhari had already signed the new tariff regime. Under the regime, essential industrial sector accessories, such as bolt, industrial oil and other equipment would witness fall in tariff rates. This, the government said, would encourage local industrialisation. Part of the circular reads: “This is to confirm that Mr. President has approved the 2016 fiscal policy measures made up of the Supplementary Protection Measures (SPM) for implementation together with the ECOWAS CET 2015 – 2019 with effect from 17th October, 2016. Consequently, all transactions prior to the effective date of this circular shall be subjected to the tariff rates applicable before the coming into effect of this 2016 fiscal policy measures.”

Impact on Generation

The Customs revenue target for this year was yet to be released as at the time of filing this report. But it could be between N1trillion to N1.2trillion. With the increase in the tariff on luxury items, among others, there is no doubt that the service may meet its target this time. Although importation of such luxury items has gone down, including other goods as beverages, many importers still struggle to source foreign exchange to bring them into the country. This is simply to remain in business. This explains why they have remained very expensive. But the other key factor that will continue to increase customs revenue is the policy banning importation of vehicles and rice through the land borders.

Though the policy is painful to Nigerians, it may turn out to increase revenue for the Customs and other agencies of government. This is because importers, who bring in their goods through the seaports pay high duties unlike those who go through the land borders. This explains why many importers divert goods coming to Nigeria through the neighbouring ports. Importation through the land borders has been argued to favour mainly some unscrupulous customs personnel and smugglers. It was for this reason that the comptroller-general was said to have lobbied to get the federal government to introduce the policy banning rice and vehicles from coming through the land borders.

The policy is, however, a big blow to many Nigerians since it is cheaper to buy vehicles when one crosses the land border than buying the ones that came through the seaports. Many believe that the ban will create a new problem of increased wave of smuggling that may be difficult for the Customs to handle.

Revenue Vs. Trade Facilitation

One issue that has been used against Nigeria is that the government has always paid more attention to revenue generation from the ports than trade facilitation as against the standards set in other neighbouring ports. One of the reasons why Nigerian importers prefer the neighbouring ports of Cotonou is because of the efficiency in their port system, easy processes and absence of delay in clearing goods and low cost of doing business at the port. It is the same in other West and Central African ports, which compete with Nigeria in the choice of a load centre. In Nigeria, the high cost of doing business at the ports is unimaginable.

The charges by most service providers are so high that many Nigerian importers prefer to divert such goods through the neighbouring ports where they bring them into the country through the border stations. Some of them are smuggled. Efforts to address such high cost of doing business in the ports are usually frustrated by the service providers who deploy all their resources and connections to continue to reap from illegality. Most times, the government lacks the political will to address the issue, preferring the legal system to prevail. Yet, our legal system is so corrupt that most times the arbitrariness continues to thrive. That is what appears to have prevailed in the ports industry.

Stakeholders’ Views

Industry stakeholders, who spoke on the new tariff regime announced by the finance ministry said it spoke volumes of government’s desperation to rake in more revenue from the maritime industry this year without addressing key economic issues that have affected the sector. While those, who spoke to this writer say there was nothing wrong in imposing high duties on luxury items, they, however, criticised government for increasing duties on essential items that Nigerians cannot do without, including duties on some pharmaceuticals. Besides, they pointed out that the major issue is the high cost of sourcing foreign exchange. Former President of National Association of Government Approved Freight Forwarders, NAGAFF, Dr. Eugene Nweke, said the issue had been the difficulty or the cost of buying foreign exchange to import most of the goods into the country.

Nweke said that it was surprising that while government was desirous in reaping from the maritime sector, it had introduced policies that were stifling trade in the sector. He said there was nothing wrong in introducing high duties on luxury item, but added that government should introduce policies that will make it easy for importers to source foreign exchange without stress and at good rate. He also advocated for a reduction in the tariff of some goods imported into the country apart from the luxury ones. A maritime lawyer, Mr Kasa Opara, who also agreed on reduction of tariff on some goods that are not luxury items added that the foreign exchange policy, which has denied most importers except manufacturers’ official allocation of foreign exchange has created a lot of havoc in the maritime industry. Opara said government should consider the huge economic value created by the maritime industry when it is introducing policies that suffocate the system. He said that the high tariff, which importers pay on goods was the reason why prices of goods in the market were very high.

He urged the federal government to have a rethink on its foreign exchange policy for the sector to take its pride of place in national economic contribution.

Repositioning Nigeria Customs Service for Better Performance?

With a surprise deployment of 245 senior customs officers, including those in the rank of Assistant Comptroller-Generals, there are indications that the Nigeria Customs Service leadership may be refreshing the system for efficient revenue generation and service delivery, writes Francis Ugwoke

It was a New Year message for senior officers of the Nigeria Customs Service (NCS), who were affected in a redeployment exercise announced by the Comptroller-General of the Service, Col. Hameed Ali (rtd). Affected officers did not expect the news when it came. First, it was with the officers in the ranks of assistant comptrollers-general before it was followed by deputy comptrollers scattered in many parts of the country.

Among those affected were Charles Edike, who was moved from Zone A to Human Resource Development (HRD); ACG Ahmed Mohammed from HRD to Zone B; and ACG Aminu Dangaladima from Zone B to Enforcement. Others were ACG Francis Dosunmu moved from Enforcement to Zone D; ACG Augustine Chidi from Zone D to Excise, Free Trade Zone and Industrial Incentives (Ex, FTZ, & II); ACG Monday Abueh from Ex, FTZ, & II to Zone A. Similarly, ACG Umar Sanusi was moved from the headquarters to Zone C and Abdulkadir Azerema redeployed from Zone C to the headquarters. The Customs had last year sacked 48 officers. It also retired 11 other officers. In a statement signed by the Customs spokesperson, Joseph Attah, the exercise was part of the efforts of the CG to strengthen operations and reposition the service.

This is to meet the challenges of 2017. He charged all officers and men of the service to ensure maximum collection of revenue and strict implementation of fiscal policy of government. Perhaps one significant aspect of the exercise was the deployment of the Public Relations Officer of Customs, Wale Adeniyi, who was in that position for close to two decades. He is among the 238 deputy comptrollers affected in the exercise. As the image maker of the service, Adeniyi has been in the Abuja headquarters for close to two decades. He has resumed office in Apapa Port Command. Observers say if he had the choice he would have remained in Abuja for obvious reasons. Movement from Abuja to Lagos for such a big organisation like Customs is considered a big issue for the personnel affected.

The reasons are obvious, Abuja is a place to work and enjoy life, considering the good road network and traffic –free drive to almost any part of the city. It is the opposite in Lagos, particularly Apapa where traffic is a nightmare for any worker. But Adeniyi has no choice, and he would only be visiting his family in Abuja every weekend if they cannot move to Lagos. As a deputy comptroller in Apapa, he would be on the field or his office face to face with customs operations in a clear productive manner. It is like a soldier in the war front where action takes place.

Postings in Customs

There are two sides of the coins in Customs postings, like in many other organisations where there are ‘juicy’ areas. Certainly, some people will be smiling and others crying. And it is all about the ‘economy’ and what goes into the pocket. Apapa port is one area that is ‘juicy’ that every officer will always be happy to smile home after each day’s work. So, it is also for officers in Tin Can Island port, among others.

Officers, who are moving out of Apapa or anywhere in Lagos to ‘dry states’ where there is no seaport or border posts where smugglers can be hunted, have reasons to cry. It is not about salary. It is about real deals, including offenders in concealment, under-declaration, under-invoicing, among other economic crimes. These crimes are money spinners for officers in some duty posts. And they must make returns to remain on such ‘juicy’ positions.

Repositioning

In recent time, the customs management has come under criticism by many Nigerians that it has not done enough in certain areas. Many believe that the leadership of the Customs may have carried out the exercise to also change the situation. Many believe that the war against corruption among officers has not been won by the CG.

The other issue is smuggling activities in the border routes, which many believe have remained a big problem in the country. While it is true that one witnesses series of seizures announced by the various commands across the country, yet one can still get some prohibited goods from Nigerian markets. Some officers of the service are being accused of colluding with smugglers to allow some prohibited items into the country at agreed time for a fee. But the argument is that the customs has not been well equipped by the federal government to police the borders against smugglers. The illegal routes are uncountable.

However, it is expected that the redeployed officers will have a lot to offer to the service in their areas of operations. The redeployment is seen as refreshing the system for better performance.

A source told this writer that what Ali did was simply to try new officers in certain positions for maximum results in the area of revenue generation and service delivery. If this is the case, Ali will have to exercise patience to get good results. The reason being that officers in new positions always spend time learning before perfecting the system. Some of the officers may not have seen certain customs documents before and have to be put through to be able to discharge their duties well.

Ali’s Assignment

Industry observers believe that Ali is heading somewhere soon in his assignment of repositioning the Customs. Customs sources say, he is already searching for his own replacement. And he would do this before the plans to merge the Customs with the Federal Inland Revenue Service (FIRS), is fully realised. Sources said since Ali is one man who is not materialistic from every indication, he would want to conclude his assignment as soon as possible and hand over to a customs officer from the system.

Our source disclosed that, this is most likely to be this year. Already, most of the serving deputy comptrollers-general are billed to retire from service this year. This means that the present ACGs will certainly climb to their positions. But our source added that Ali is currently in search of who will take over from him from the rank of comptrollers.