The Nigeria Customs Service (NCS) has introduced a new 4% charge on the Free On-Board (FOB) value of imports, sparking concern among businesses already struggling with rising operational costs.
The policy, aimed at improving the agency’s efficiency, will further increase the cost of importing goods into Nigeria, affecting businesses and consumers.
NCS Comptroller-General Bashir Adeniyi announced the measure in a recent statement, clarifying that the FOB charge is calculated based on the total value of imported goods, including transportation costs to the loading port. While the NCS sees this as necessary to enhance revenue collection and streamline operations, importers fear the additional levy will worsen economic challenges.
Rising Costs for Importers and Consumers
Nigeria heavily relies on imported goods, with machinery, refined petroleum, automobiles, cereals, and pharmaceuticals ranking among the top imports, according to the National Bureau of Statistics (NBS) Q3 2024 Foreign Trade in Goods report. Machinery alone accounts for nearly 20% of total imports, making it a crucial component of industrial and manufacturing processes.
The newly imposed FOB charge will significantly impact costs. For instance, an automobile valued at N30 million will now incur an additional N1.2 million due to the 4% levy, further increasing import tariffs, which range between 5% and 35% depending on vehicle type and engine capacity.
Similarly, imported machinery will also see a price hike, as import duties and Value Added Tax (VAT) are calculated based on the Cost, Insurance, and Freight (CIF) value, which includes the FOB charge. This means businesses will face higher import expenses, potentially stalling industrial growth and investment.
Pharmaceutical Sector Also Affected
Even the pharmaceutical industry, which benefited from an executive order waiving import duties on select drugs, is not exempt. While these medications may still be duty-free, the FOB charge applies, making imports more expensive. This could lead to higher prices for essential medicines, affecting accessibility for Nigerians already grappling with inflation.
Industry Backlash and Economic Concerns
The decision to implement the 4% FOB charge and the existing 1% Comprehensive Import Supervision Scheme (CISS) fee has drawn criticism from industry stakeholders. Businesses argue that these additional levies will further burden an economy already facing high inflation and a depreciating currency, which have significantly increased commodity prices.
The Association of Nigeria Licensed Customs Agents (ANLCA) has vehemently opposed the charge, calling for immediate withdrawal. ANLCA President Emenike Kingsley Nwokeoji criticized the move, stating, “The Nigeria Customs Service must not become a revenue-generating agency at the expense of struggling Nigerians amid skyrocketing inflation.”
In response to growing concerns, the NCS has pledged to address industry grievances in ongoing discussions with the Federal Ministry of Finance. The agency has also defended the charge, citing Section 18 (1) of the NCS Act 2023, urging stakeholders to support what it describes as a legally mandated initiative.
As negotiations continue, businesses and consumers alike remain wary of the potential economic impact of the new levy, questioning whether it will ultimately do more harm than good.
