Doing Business in Nigeria | |
Doing Business in Nigeria | |
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Monday, January 22, 2018 04:38PM / Deloitte
Monday,
1 January 2018, did not only mark the celebration of New Year in Nigeria, it
also heralded the effectiveness of the revised import and export guidelines
(the Guidelines) issued by the Federal Government of Nigeria (FGN). While the
Guidelines are not entirely new, the impact of its changes are significant and
traders must pay particular attention to the specific changes to avoid
potential financial and reputational risks.
The
changes could be classified into two broad categories ranging from establishment
of newer requirements and introduction of weightier sanctions for
noncompliance. Highlights of these changes are set out below:
Establishment of new requirements
• Palletization: The
most significant change is the requirement to palletize imported goods.
All containerized goods, except those specifically exempted (as documented
in FGN’’s Circular) are required to be stacked on pallets. Expectedly,
this directive received criticism by traders who consider palletization an
onerous obligation – as pallets occupy space, add extra weight and come
with a fee. Traders already operating on tight margins may not be able to
survive within the boundaries of the current business environment. It is
however imperative to note that palletization is not a novel concept in
global trade. It is seen as best practice as it enhances efficient supply
chain operations. Specifically, palletization facilitates easy handling by
forklifts which results in improved timeline to store, load and unload
goods which have been stacked on pallets. From FGN’s standpoint,
palletization would help accelerate operations at the ports, aiding the
ease of doing business in Nigeria
• Transmission of cargo
manifest prior to arrival: Carriers are obliged to transmit cargo
manifests to the Nigeria Customs Service (NCS) and Nigeria Ports Authority
(NPA) prior to arrival. This is meant to reduce associated delays with
risk profiling, cargo placement and ultimately clearance of goods. While
this requirement is not entirely new, we assume the drive for compliance
will be more effective under the new regime.
• Joint examination of cargo: The NCS is now required to coordinate
joint physical inspection of cargo to reduce duplication of physical
inspection by several government agencies as this creates avenue for
illicit business and impacts the turnaround time for clearance of goods.
• Reduction in required documentation: Documents required for imports
have been reduced from 14 to 8 and for exports, from 10 to 7. However,
there is no clarity on the actual documents retired, as documents usually
required during an import or export under the old guidelines, still
feature in the Guidelines. To avoid ambiguity, it would be useful to have
communication from FGN stating clearly the expunged documentation.
• Obligation to improve service delivery: There are enhanced
timelines to execute essential services. These include weekend inspection
services by NCS, strict compliance with timelines by authorised banks.
Further, preshipment inspection agents (PIAs) must schedule inspection of
exports within 48 hours and issue a clean certificate of inspection (CCI)
within 72 hours of inspection.
• Extension of the
validity period of Form M: The initial validity period for Form M has been
extended to 360 days for general merchandise and 720 days for capital
goods. Authorised banks could further extend the validity period by 180
days and 360 days for general merchandise and capital goods respectively.
Any further extension must be with the approval of the Central Bank of
Nigeria (CBN).
Introduction of weightier
sanctions
These
have been categorized according to the stakeholder/players in the industry.
• Authorised banks:
Exclusion from doing business with the NCS for issuing multiple Form M’s
on the same import transaction.
• Importers and exporters: 1% charge on export proceeds not
repatriated within 180 days from export and 25% charge on free on board
value of unapproved unpalletized cargo.
• Carriers: Refusal of berthing rights to carriers who fail to
transmit cargo manifests prior to arriving Nigeria.
• PIAs: 25% charge on
service fees for failure to issue a CCI within 72 hours of inspection and
potential withdrawal of inspection mandate for failure to make prompt
returns, attend inspections timely, and identify non-compliant exports.
The 2018 edition of the World Bank’s ease of doing
business survey ranked Nigeria at 145 out of the 190 economies assessed
(previous year survey ranked Nigeria at 169). Based on the country’s
antecedents, a 24 place gain is commendable but inadequate, in light of the
current economic realities.
Further
review of the rankings shows that of the10 underpinning drivers for the
rankings, Nigeria is mostly inadequate in trading across borders. Specifically,
compared to the previous rankings, the country fell 2 places from 181 to 183
(out of 190 economies evaluated) on the aspect of trading across borders. From
a competitive standpoint, this cannot be the narrative if the country is
seeking to attract investment and promote more efficient manufacturing supply
chains for production of locally consumed and exported goods.
The
Guidelines appear to be a deliberate strategy by FGN to curb the gridlock at
the ports and in my view should prima facie improve the turnaround time for
cargo clearance. Nonetheless, framework documentation without actual implementation
is futile and implementation without mechanisms for gauging effectiveness
amounts to sailing a ship without the rudder. It should no longer be business
as usual for the movement of tangible goods across the border. The success of
the country’s economic recovery and growth plan, hinges on her ability to
efficiently create global supply chains originating or terminating within her
boundaries.
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