Tariff Hikes and Rising Customs Revenue

Thursday, July 18 2019  01:28PM / CSL Research / Header Image Credit: Voice of America

Amidst gross inefficiencies and dilapidated states of port infrastructure in Nigeria, the Nigerian Customs Service (NCS) have managed to sustain increase in duties collection in H1 2019. According to reports in the local media, the Nigerian customs recorded import duties revenue of N418.3bn in H1 2019, representing an increase of  18% y/y when compared to H1 2018 (N354.5bn). We also recall that the NCS announced a record revenue collection of N1.2tn (Import, Export and Excise duties) ahead of the target set by the Federal government in 2018.

The rise in customs revenue comes as the federal government continues to put in efforts to diversify governmentís revenue base from the volatile oil revenue. We believe the improvement in trade activities as shown by Q1 2019 foreign trade statistics wherein total trade grew by 7.5% further underscores the revenue growth recorded by the custom authorities. Additionally, the implementation of Nigerian Integrated Customs Information System II (NCIS II)- aimed at trade facilitation and tariff processing should have supported the growth in customs revenue. Indeed, the custom authorities have since claimed this new technology has helped in improving efficiency in tariff collection process and blocking leakages.  

However, market participants such as the freight forwarders and customs brokers have lamented multiple checks and increasing tariffs on imports into the country. We recall that the customs authorities, as part of its efforts in driving revenue growth recently reviewed the official exchange rate for duties payment from N306/US$ to N326/US$. While this is expected to have a positive impact on customs revenue,  we believe consumers will bear the brunt as importers shift the burden to consumers in forrEm of higher prices.

Despite the improved efficiency claimed by the port officials, traders have continued to lament how multiple checks prolong clearing of goods. The traders after making payment for duties have to wait for extended number of days before the custom officials confirm such payments. Additionally, congestion at the country is major port in Apapa coupled with dilapidated road infrastructure have increased the time it takes to move goods in and out of the port after days in the clearing system.

Although, foreign trade data has shown consistent improvement in trade volume in recent years, tariff hikes and port infrastructure inefficiencies have seen Nigeria lose business to neighbouring countries. In our opinion, it is imperative for the federal government to put in place the required infrastructure such as good road networks complemented with rejuvenation of other ports in the country, in a bid to reduce congestion at the Apapa port. We believe this would drive faster growth in trade volumes and consequently improve revenue. This should have a better economic impact on the country as opposed to the current practice of multiple taxation and tariff hikes. 

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