Divergent views trail Nigeria’s adoption of ECOWAS uniform tariff

Market place

Market place

21 June 2015, Lagos – The recent adoption of the Common External Tariff, CET, and the attendant shift in KPIs by the Nigeria Customs Service, NCS, have begun to generate different reactions from different sectors of the nation’s economy with players in the sectors canvassing different perspectives to the sub-regional uniform tariff regime, writes Olaseni Durojaiye

The pursuit of common economic policies among the governments of countries in the Economic Community of West African States, ECOWAS, which births the Common Economic Tariff, CET, initiative.

The CET, which necessitated countries in the sub region to have a uniform duty rates has been generating discourse among players in Nigeria’s economic space as discussants have begun to assess how the policy would affect the different sectors of the nation’s economy.

Respondents to THISDAY enquiries have shown particular concern in the recent disclosure by the Nigerian Customs Service (NCS) to the effect that having adopted the CET regime, the service will be shifting its key performance indicators from revenue generation to other matrix which include how the operations of the service is able to impact local industries and cargo processes at every port level.

In media reports that emanated from an enlightenment workshop organised by the service for stakeholders in Abuja recently, NCS Public Relations Officer, Alhaji Wale Adeniyi, disclosed that “All along, it is good when we generated so amount of billions of naira. All along the matrix that we use is to say we have target and we have achieved millions, then everybody believes we have done well. This paradigm is going to shift in the years to come because of situations like this (CET).”

Speaking further, Adeniyi stressed that “our multilateral commitments to treaties like the ECOWAS to other works within the WTO is going to take a lot of toll on our revenue base. So we have to find other standards of measuring how good we have performed. We are going to be talking of how we are supporting our local industries; we are going to be talking of how many industries are operating despite the harsh economic development …. We are going to focus on how long it takes to process declarations and how many do we process in one day, what is the time to discharge goods from vessels and the time it takes to leave the port. These are some of the new matrix we are going to be developing as our key performance indicators not necessarily how much of revenue collected,” he stated.

Maritime Sector’s Perspective
However, in an interview with THISDAY, Fred Akokhia, Vice President of National Association of Government Approved Freight Forwarders (NAGAFF) noted that CET is not a totally new initiative and added elements of the initiative were in operations already. According to him, the Fast-track Clearing Process is one of such initiatives. He is of the opinion that the policy paradigm shift announced by the Service will benefit local industries on the long run as they will be able to move their products freely within the sub region.

“It is too early in the day for anybody to talk of negative or positive impact on local industry. Being a government policy, before it is adopted, studies would have been conducted to ensure that it will not impact local industries negatively. As a matter of fact, it will favour local industries on the long run because they will be able to move their goods freely in different markets within the sub region.

“The fast track Clearing Process which is in place has been to the benefit of local industries. When manufacturing concerns import goods, as long as the tariffs have been paid the goods goes straight to the warehouse of the companies; customs examination is done at the premises of the industrial concern,” he added.

Concerns of Local Industry
Meanwhile, players in the country’s manufacturing sector have raised concerns and argued that the adoption will expose local industries to unhealthy competition from their counterparts within the sub region.

Responding to enquiries, President, Oyo Chamber of Commerce and Industry (OCCI), Mr. Adegoke Ogunniyi, stated that government adopted the new regime on the basis of revenue loss to other West African countries. He added that the move will put local industries at a disadvantage going into competition with companies and goods emanating from other West African countries due largely to the high cost of borrowing in the country and called on the government to look into reducing cost of borrowing in the country.

According to him, “Adopting Common External Tariff with other countries in West Africa will put local industries at a disadvantage, beyond industrialists, other corporate organisations have been complaining too and this is due largely to the high cost of borrowing in the country. I understand that government is looking at that from a revenue perspective. Nigeria government believes it has continued to lose revenue to other West African countries, particularly with regards to tariffs paid on clearing vehicles which may be true; but on the long run, the policy does not favour local manufacturers.

Economists’ Perspective
However, economists argued that the policy is a welcome development and maintained that the CET “has a protectionist effect for the region.” In a response to THISDAY enquiries, an economist and Chief Executive of Eczellon Capital Limited, Diekola Onaolapo, insisted that “While the policy exposes local manufacturers to increased competition from their counterparts in the region, the size of the Nigerian economy, exposure to new technology and more efficient use of economies of scale will still allow Nigeria to compete favorably.”

According to Onaolapo “The implementation of CET is positive for the country considering that it unifies tariffs and other excise duties across ECOWAS nations. This has a protectionist effect for the region as special reduced tariff would be charged on raw materials and other inputs for the local manufacturers while levying high tariffs on goods competing with the local industries. Also a unified tariff implies that importers would not need to circumvent particular ports with a view to get lower tariffs in other ECOWAS ports. Nigeria in the past has been at a disadvantage position with importers preferring to take goods to Cotonou to benefit from cheaper tariffs even though the eventual destination is Nigeria.

“With respect to a shift in KPI from revenue generation to other indicators like seamless Port Processing, I actually believe this is a welcome development as an improvement in port processing is bound to encourage more importers to use the ports while in turn increasing revenue generated from increased patronage. Also, an improvement in the process would have a multiplier effect on the local industries productivity as unnecessary time and money is not spent in the port, hence revenue earning potential of these companies is increased and government taxable base is also increased,” he concluded.

In his response, industrialist and former president of the Manufacturers’ Association of Nigeria (MAN) Chief Charles Ugwu, noted that the Nigeria Customs Service had always based its performance matrix on maximising revenue collection for the Nigerian government, and facilitating legitimate trade into and out of the country. He noted that other vital issues such as dealing with smuggling were tackled purely from the point of view of revenue losses.

He stressed that NCS never concerned itself with the negative impact and severe damages done to local producers and local products by smuggled products, which are also cheap, from more advanced manufacturing countries. He lamented that local industries suffer negative impact by smuggling and imported fake or substandard products, which use the bridge-head offered by some neighbouring ECOWAS countries such as Republic of Benin, Cameroon and Togo.”

Speaking on the uniform tariff initiative, he stated that there is no uniform custom tariff yet in the sub region and explained that every country has the prerogative to deploy import levies in addition to the standard CET tariff to protect its local industries.

“For example, the import duty on rice is 10 per cent, but some countries like Nigeria, who wish to promote local rice production can deploy various levels of import levy as additional tax on the commodity to protect its local industries. Unfortunately, our neighbouring countries such as Republic of Benin maintain their tariff at 10 per cent with zero levy. This lower tariff structure thus attracts traders and cargo shipments into their ports. The country then becomes the bridge-head or channel for smuggling into a country like Nigeria with a much larger market,” he argued.

About the Author