Manufacturers call for suspension of Customs’ 4% Free-on-Board import levy 

The Manufacturers Association of Nigeria (MAN) has called for the suspension of the implementation of a 4% charge on all Free On-Board (FOB) value of imports recently imposed by the Nigerian Customs Service.

Nairametrics reported that the NCS last week, announced the implementation of a 4 percent charge on the Free On-Board value of imports in line with the provisions of the Nigeria Customs Service Act (NCSA) 2023.

“The FOB charge, which is calculated based on the value of imported goods, including the cost of goods and transportation expenses incurred up to the port of loading, is essential to driving the effective operation of the service,” Abdullahi Maiwada, the spokesperson of the service said in a statement.

In a statement released on Tuesday and signed by the Director General of MAN, Dr Segun Ajayi-Kadir, the association condemned the “sudden and inopportune introduction and implementation of the 4% FOB Levy.”

MAN said it is an “unfortunate addition” to the 1% Comprehensive Import Supervision Scheme (CISS) fee being paid by its members.

The association said it is concerned that the government through the NCS is introducing new levies at a time when it should be helping local businesses reduce the cost of doing business.

Nairametrics reported that the NCS is also proposing a 15% hike in port charges. MAN says this will drive up inflation and severely derail the little recovery gains of the manufacturing sector.

“We had expected that the NCS would give priority to trade facilitation in view of the prevailing economic downturn, rather than exacerbating the spiraling cost of production,” the statement noted.

“This is in view of its potential wider implications on the economy in the form of low productivity, increased unemployment rate, and consequent higher propensity to criminal activities and insecurity, not to mention the negative impact on the disposable income of the overall economic wellbeing of the over 220 million Nigerians,” it added.

Ajayi-Kadir further noted that the government and its agencies should be promoting a business-friendly tax regime rather than imposing new tariffs.

“It is equally worrisome that this is coming at a time when there is a planned 15% hike in port charges and industries are struggling with the astronomical increase in the effective import duty calculations rate.  

“All government institutions should recommit to the reduction of the cost of doing business, expanding the scope of businesses and broadening the nation’s revenue base.”  

Why 4% FOB should be suspended 

MAN rejected the implementation of the FOB levy and demanded its suspension on the following premises:

• The already high rate of calculating the customs duty exchange rate and the new levy will further escalate the cost of imported raw materials, which had earlier jumped by over 118 percent from ₦2.07 trillion in the first nine months of 2023 to ₦4.53 trillion in the same period of 2024.
• The levy will cause heavy disruption in the supply chain, trigger raw materials stock-out in many manufacturing concerns, inflict higher cost of demurrage, further increase the huge volume of unsold inventories, and worsen the competitiveness of Nigerian manufacturers.
• The levy is coming at a time when the headline inflation has hit a historic record of 34.8 percent in nearly three decades and majority of Nigerians are struggling. Therefore, the impact on the cost of locally produced items will be instant and far-reaching.
• The introduction of the levy contradicts the principles of the ongoing Fiscal Policy and Tax Reforms and the spirit behind the tax bills currently being considered by the National Assembly. These efforts are targeted at eliminating the multiplicity of taxes and reduction of tax burden for households, manufacturers, and other private businesses.
• The introduction of the levy is an additional incentive to smuggling, trade diversion, under-declaration of duty, and other trade infractions that have bedeviled the country, stretched the capacity of Customs, and undermined the revenue profile of the country.
• It will jeopardize the plan of the Federal Government to boost forex earnings through non-oil export, as many manufacturing exporters rely on imports for vital inputs and machines that are not available locally.
• The levy will jeopardize Nigeria’s aspiration to be an investment destination of choice and an industrial hub in the West African sub-region.