MAN DG begs Customs: Suspend FOB levy, clear port congestion

•Regrets that ‘cost of bringing a 40-feet container from Singapore to Nigeria is lower than the cost of taking it to Agbara from Apapa

•Commends customs for exceeding target, regrets manufacturers’ contribution to GDP

By Dickson Omobola

A few days after Chief Ben Ezeibe, an importer and manufacturer, appealed to the Customs to clear the congestion of uncleared containers at the ports, the Director-General of Manufacturers Association of Nigeria, MAN, Segun Ajayi-Kadiri, was on air, speaking on the same problem but largely on a new levy he feels will lower the input of manufacturers to Nigeria’s GDP.

In this interview on Arise News, Ajayi-Kadiri called for the suspension of the Free on Board, FOB, levy imposed by the Nigeria Customs Service.

Ajayi-Kadiri warned that FOB could escalate manufacturers’ costs, increase inflation and reduce their competitiveness. Excerpts:

Under INCOTERMS, International Chamber of Commerce terms, there is free on-board, freight on-board, cost insurance rate and others. These are international standards. Now, MAN is saying that the FOB of four per cent that Customs wants to collect is not acceptable, but rather seven per cent collection fee and 1 per cent Comprehensive Import Supervision Scheme, CISS, which existed before. What is special about the concern that MAN is expressing, and what is the global best practice?

We are coming from a background of a high-cost environment that needs to be brought down so that we can increase production, and ensure that we have a sector that is able to compete with imported products and is able to be competitive when it exports to other climes.

What we have seen is that charging four per cent FOB is going to significantly impact our cost structure, at the same time, set us apart from other comparable economies, particularly within the West African subregion, in terms of what we charge. There is already the established duty for raw materials, spare parts and machines. Those ones are set by the World Customs Organisation, and they are driven by HS codes.

We do not have any issue with that. But the additional ones, like the FOB, is what we worry about, and we say it has to be comparable between Senegal, Ghana and Côte d’Ivoire, countries whose FOB is between 0.5 per cent and one person cent. Taking ours to four per cent far outclasses the 1 per cent Comprehensive Import Supervision Scheme, CISS, and the seven per cent cost of collection that Customs previously collected.

Meanwhile, when Customs was collecting this one per cent CISS and seven per cent cost of collection, they were able to exceed their target for 2024. So, there was really no imperative for increased earnings by Customs. And if it is to fund their operations, is it that they were underfunded in 2024, yet they were able to outclass their set target? What we are saying is that we should direct attention to trade facilitation and reduce the cost of import, because everything boils down to what comes to the consumer. And we are trying to beat down the rate of increase in inflation that we only managed to bring to 21.88 per cent in the last quarter.

We are commending government for stabilising the economy. However, this introduction is going to escalate costs, drive off inflation and reduce our competitiveness because we compete against third world countries in terms of what we import. So, we are saying that Customs should kindly consider the overall impact on the economy, manufacturer, consumers, on the taxes we are going to pay to government, because if we reduce our capacity utilisation and profitability, government is going to be impacted. And this administration has announced that it has focused on increasing domestic production and reducing the burden of cost. So, that is the concern we have with the FOB.

For this administration, it is a challenge between revenue generation and supporting sectors like manufacturing. But what is the alternative?

We need to set the balance. Will you be concerned about baking a bigger cake so that you can have more shares for the tax authority? Or are you going to kill those who are going to bake the cake? The truth of it is that, and in this case, it is so easy to make the comparison, that while we were maintaining the old regime, customs was able to exceed its target. And government revenue will be better boosted when you tax the fruits, not the seeds. When you are directly increasing our costs, you are hitting on productivity.

You are going to make us underperform. Already, the contribution of manufacturing to the gross domestic product, GDP, is less than nine per cent, and in some economies, it is 15-20 per cent. So, if you are able to reduce the cost of production, you will expand the output of the sector, and then we will be able to contribute to this revenue that we know that government needs. So, we are not undermining government’s revenue targets. Last year, Customs exceeded their target. So, and if you are able to incentivise production, you are going to have a trickle-down effect on so many other sectors. You are going to impact jobs, government revenue, reduce social attention, improve innovation and expand investment.

There is a general perception now among manufacturers, drawing from our manufacturers’ confidence index that we normally do quarterly. We have seen a two per cent increase in the confidence that manufacturers have in the economy, and we can trace it directly to measures that have been taken by government to stabilise the economy. This government was commended by Dr Okonjo-Iweala for stabilising the economy, but it warned that we need to sustain the tempo and reduce the pains that accompanied the reforms. This is not one of the ways to do so. So, what we are saying is that we are not going to lose revenue. In the long run, we are going to actually build more revenue for government.

What do you want?

One, the suspension of the implementation of the four per cent FOB, and that we are able to revert to the one per cent CIS plus seven per cent cost of collection, while customs engages in a conversation with stakeholders, for us to be able to look at the overall impact. You do not just make government policies without consulting or making a technical assessment of the impact on the economy.

This government has focused on things that we consider to be key to getting us out of the mess that they made. It is no excuse that you made a mess. This government has shown the tendency to do the job. Now, we have achieved some stability. We want a situation where it is not reversed. We should not have all these kinds of intervening factors, these distractions. We should just continue on that trajectory so that we are able to achieve the growth that we desire. So, this (FOB) should be suspended.

What would be the impact if we take this four per cent? Is it better for you to focus on trade facilitation and reduce your focus on revenue generation? Can we calculate to see how in the long run the economy is going to be better for it, the 230 million Nigerians are going to be better for it? Let us have this kind of conversation. These are some of the questions. We are even saying this can go on between now and December, so that by January 1 when the four tax bills are going to kick into effect, we can have a simultaneous implementation so that we enjoy the boost. This economy needs a huge infusion of growth levers, and this economy has shown resilience.

The private sector people have borne the brunt of the maladministration of the past. Now, we are having light at the end of the tunnel. Do not let us quench this light. That is just what we are saying. So, this conversation is going to help us. Customs will make more money. Nigeria will benefit in terms of tax. Manufacturers will be able to produce. The manufacturing sector in Nigeria, the biggest, obviously the largest economy in Africa, cannot be contributing less than 10 per cent to GDP. We want collaboration with customs to be able to get out of it.

On global best practice and turnaround time at the ports

On international trade law, I completely agree that these are universally applied. But what I am saying is that it is left to the individual countries that subscribe to these laws to determine what is good for their economy. You have the discretion to do what works for your economy. And what we are saying is that even if you are going to charge FOB, it can come lower. You can be at par with your comparable countries in West Africa. And as I said, that is from 0.5 per cent to 1 per cent.

On the issue of turnaround time at the ports. In fact, with the introduction of B’Odogwu, I must admit that we are in talks with Customs to be able to see how they can overcome the glitch. For the past two weeks or so, our members have not been able to clear their goods, and it is incurring demurrage.

There is a need for Customs to speedily address this so that our members can clear their goods. Already, we are having stock out in some factories. And when it is time for us to eventually clear, we need to discuss the issue of demurrage that we have incurred, not because of our own lack of readiness to clear, but because it was not possible for us to go through the process at the ports. It remains a challenge, and it has even significantly increased the cost of imports. I did say that the cost of bringing a 40-foot container from Singapore to Nigeria is lower than what it takes to take it from the ports to Agbara, which is just 26 kilometres away. We have significant challenges in that, and we have to peel this off gradually. We understand that Customs is trying to improve its processes by introducing this automation and making it seamless, but they have glitches. We are patient enough to agree with them, but we should not suffer the repercussions, and that is why I say we are having that engagement.

Chief Ezeibe had earlier raised the alarm on the congestion at the ports following the glitch that has slowed down clearing of imported goods at the ports.“”The new clearing technology is having issues, making it difficult to clear containers. Demurrage is accruing for importers and the government is also losing money because of this new technology called B’Odogwu. The government and importers are incurring losses. It is worst for importers whose demurrage is now a burden many cannot bear”, Ezeibe lamented.“Customs spokesman Mai Wada said the technical issues that affected the clearing system were being addressed but that the Customs was not likely to discontinue with the new technology , revealing that hacking attempts by fraudsters caused the glitch.

The post MAN DG begs Customs: Suspend FOB levy, clear port congestion appeared first on Vanguard News.