Fallacies of NCS import duty revenue increase

The World Market and Trade report of the United States Department of Agriculture has thrown up figures that should compel the federal government to go back to the drawing board to fashion out measures that would plug intolerable leakages in its import duty revenue.

From figures flaunted by the U.S. government agency on Nigeria’s rice consumption, importation and domestic production, the Nigeria Customs Service (NCS) should be asked to explain why the dollar value of Nigeria’s import duty revenue has been on a steep decline since 2016.

Two weeks ago, Hameed Ali, the comptroller-general of the NCS rolled out the drums to celebrate the exceeding of import duty target set for the NCS.

It was announced that NCS exceeded its revenue target for 2018 by raking in an unprecedented N1.2 trillion as imports duty.  Ali expects Nigerians to clap for him, but only those who cannot appraise the figures from its dollar value would clap in ignorance. NCS is celebrating corruption, inefficiency and gross incompetence. The figures from the U.S. government have shown that NCS is ripping off Nigeria. Ironically, no one in the federal government has lifted a finger in protest.

The NCS confuses a docile populace with seeming increases in the naira value of its import duty revenue in the face of massive devaluation of the naira, but would not tell the world why the dollar value of Nigeria’s import duty revenue is plummeting precipitously.

Joseph Atta, a deputy comptroller of customs who serves as the agency’s spokesman said the NCS has sustained steady increases in import duty collections in the last three years since Ali became its comptroller-general.

Atta said that the NCS realized N898.8 billion as import duties in 2016.  The figure rose to N1.037 trillion in 2017 and peaked at N1.2 trillion in 2018. 

On the surface, the NCS revenue figures appear impressive. However, the figures from the American government agency have exposed the fallacies of the NCS import duty revenue increase. The report states that Nigeria consumed 6.9 million metric tons of rice in 2018, while it produced 3.7 million metric tons locally. That suggests a supply deficit of 3.2 million tons which was filled with the importation of three million metric tons of rice, according to the report.  The federal government disagrees with the U.S. government’s rice import figures on the grounds that the consignments of rice mentioned as imports did not come through legal importation procedures that require the opening of letters of credit.  In other words, they were smuggled into Nigeria on the watch of NCS.

Lai Mohammed, Nigeria’s minister of information argues that Nigeria officially imported only 6,000 metric tons of rice in 2018.   

However, the minister himself alluded to the fact that large quantity of rice was smuggled into Nigeria. Responding to the figures flaunted by the U.S. government, Mohammed told news men: “When we say Nigeria imported, it is different from x-quantity of rice is being smuggled, because when you import, you open letters of credit.”

The truth therefore is that at least three million metric tons (the difference between annual consumption and local production) was smuggled into Nigeria under the watch of the men of NCS. 

A comparative analysis of NCS revenue would throw up scores of questions that Hameed Ali and his men would find it difficult to answer.  In 2014, the NCS raked in N977.09 billion as import duty revenue when the official exchange rate of the naira was N197 to the dollar.  At that exchange rate, the dollar value of NCS import duty revenue for 2014 was $4.9 billion.

Since the devaluation of the naira in 2016, the NCS has been using N306 to the dollar as its exchange rate for calculating the value of import duty on each consignment cleared in Nigerian ports.

Consequently, the N898.8 billion it recorded in 2016 as import duty revenue amounted to a paltry $2.937 billion. In 2017, the NCS import duty revenue rose to N1.037 trillion.  For that year, the dollar value of its revenue inched up to $3.388 billion.  In 2018, the N1.2 trillion it recorded amounted to $3.6 billion.  Officials of the NCS are the main beneficiaries of the federal government’s ban on rice and vehicle imports through land borders. 

A 50 kilogramme bag of rice sells for N9, 700 at Seme border.  Smugglers bribe NCS officials and ferry rice into Nigeria. That development partially explains the decline in the dollar value of import duties collected by the NCS.

For the three million metric tons of rice and thousands of vehicles that were smuggled into Nigeria in 2018, hundreds of billions of naira changed hands between NCS officials and smugglers.  The federal government got nothing.

It is now obvious that the decision to ban rice and vehicle imports through land borders is counter-productive. Equally detrimental to effective revenue collection is the jumbo tariff on vehicle imports. The policy is against the World Bank advice that jumbo import tariffs encourage corruption as importers compromise customs officials in a desperate bid to side-step the official tariff.

Since most of the three million tons of rice smuggled into the country last year came from the land borders, the federal government should reverse its policy on rice and vehicle imports and set stringent targets for NCS on revenue expected from the land borders in 2019.

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