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FG slashes tariff on tokunbo cars

Category: General

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FG slashes tariff on tokunbo cars

October 07, 2005/



The Federal Government has slashed tariff payable on tokunbo or used cars from 30 per cent to 20 per cent as it begins the implementation of the ECOWAS Common External Tariff.

But the government imposed a special trade tariff on rice and cigarettes at 100 per cent and 150 per cent respectively to keep the duty rates on these products close to the rates prevailing before the introduction of the CET.

Under the CET regime, the tariff for rice and cigarette is 50 per cent.

Prior to the take-off of the CET, they were 110 per cent and 150 per cent respectively.

The Minister of Finance, Dr. Ngozi Okonjo-Iweala, at a news conference on the unveiling of the CET in Abuja, on Thursday, said the adoption of the ECOWAS CET by the government would eliminate multiplicity of tariff in the country; reduce incessant demands by manufacturers and producers for import waivers and exemptions; and eliminate smuggling of goods from neighbouring countries.

The Minister of State for Finance, Mrs. Nenadi Usman, the Director-General of Budget Office, Mr. Bode Agusto, and the Special Assistant to the President on Manufacturing and Private Sector, Alhaji Ahmed Abdulkadir, attended the conference.

Okonjo-Iweala explained that the government had also reduced the tariff on tokunbo or used vehicles from 30 to 20 per cent only for vehicles that are eight years and below.

The ECOWAS CET is to be operated from 2005 to 2007, before a review can be undertaken.

Okonjo-Iweala said, “The CET is a simplified set of rules which harmonise the tariff of all the ECOWAS countries into a unified whole. This means that all the ECOWAS countries will have just one tariff structure for the entire sub-region.

“Like other steps which are being taking to bring the economies of West Africa together, the CET will deepen the market for goods and services within the sub-region, integrate trade, maximise opportunities for business and ultimately lead to the creation of an economic union of West African States. 

Giving the highlight of the new tariff structure, she stated that the government had reduced the tariff bands from its previous level of 20 to five.

The five tariff bands, according to her, include 0 per cent, five per cent, 10 per cent, 20 per cent and 50 per cent.

She said, “Raw materials, machineries and equipment, capital goods and other necessities, which are not produced in this country (e.g. anti-retroviral drugs for HIV/AIDS patients), will attract tariff of 0 and five per cent.

“Industrial machinery will attract 0 per cent duty rate for one year after which the impact will be reviewed. Intermediate goods will attract a tariff of 10 per cent; finished goods will attract a tariff of 20 per cent, and finished goods in industries which government wants to protect will attract a tariff of 50 per cent to encourage domestic production. 

Speaking on the tariff for some items such as rice, cigarette and ethanol, she stated that the government reduced their tariffs from 110 per cent, 150 per cent and 30 per cent to 50 per cent, 50 per cent and 20 per cent under the CET.

“We are imposing a special trade tariff on rice and cigarette in order to encourage local production of rice in the country and eliminate the consumption of cigarette. We have imposed a special tariff of 50 per cent and 100 per cent for rice and cigarette, respectively, bringing their total to 100 per cent and 150 per cent,  Okonjo-Iweala said.

When asked if the government expected losses from the lowering of the tariff structure, she said that it was inevitable.

“We expect some losses. The government gave the Nigeria Customs Service a revenue target of N210billion for year 2005 but for next year we are giving the service N195billion due to the adoption of the ECOWAS CET. So we are expecting slight reduction in duty collections from the Customs next year,  she stated.

The Minister of State for Finance, Mrs. Nenadi Usman, said that prohibited items/goods would remain prohibited from the country till January 2007, when the ban would be lifted.

The CET, she noted, would enhance trade opportunities with Nigeria’s neighbouring countries.

The journey to the CET began with the ECOWAS Heads of State Mini-Summit in Abuja in 2000, where a resolution was taken towards adopting the least tariff measure as a strategy for revving up trade relations between ECOWAS countries, under the Trade Liberalisation Scheme of the sub-region, within the shortest time.

The leaders were mandated to take all necessary measures to prepare their economies for the introduction of ECOWAS CET, based on the lowest existing Customs duties in the sub-region, which range from zero to 20 per cent.

Manufacturers have raised concerns over the operation of the CET.

They fear a reduced nominal and effective protection of domestic enterprises; increased imports, which may lead to some deterioration in the balance of payment positions; and a probably loss of revenue from import and related taxes.

The manufacturers allege that lowering tariff structure will put them at a competitive disadvantage, given the poor state of infrastructure in Nigeria and the consequent high cost of doing business in Nigeria.

The government projects revenue losses of more than N15billion for the year 2006 as a result of the lowering of tariff structure through its implementation of the ECOWAS CET.

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