Customs Revives 4% Import Levy — the Poor Will Pay for It

The Nigerian Customs Service (NCS) has decided to reimplement the 4% Free-On-Board (FOB) policy, an initiative it had suspended in February following widespread criticism of its introduction.

This FOB policy indicates the cost of an item at the point it’s shipped into Nigeria before shipping, insurance or delivery charges are added.

The federal government passed the FOB policy into law in April 2023, as part of the Customs Service Act, 2023. It replaced the separate 1% Comprehensive Import Supervision Scheme (CISS) and the 7% collection fees by unifying levies.

However, when Customs attempted to implement this policy in February, many clearing and forwarding agents complained about how it would affect their business, and it was subsequently suspended.

At the point of suspension, the NCS said it needed to review its revenue framework.

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Fast-forward to July 22, Bashir Adeniyi, the Comptroller General of the NCS, said that the extra importation levy would be reintroduced to fund and boost the operations of the customs service.

He said that the extra levy would be invested in technology advancements, meant to overhaul the operations of the NCS.

“The law states that it is from the 4 % FOB that everything Customs modernisation and administration will be funded,” Adeniyi said.

However, many Nigerians have remarked on how implementing the FOB policy on Friday would make imported products such as cars unaffordable for more Nigerians.

Cars Nation, an automobile sales page on X, shared on Tuesday that the cost of clearing vehicles from the NCS could triple to N15 million from N5 million.

“Dear Customs, please don’t do this. If this new policy is implemented, only the very rich will be able to afford cars in Nigeria,” the account wrote.

“The customs duty we paid N5 million for just last week may rise to N15 million by this coming Friday. If you’re planning to buy a car, I strongly advise you to do it by tomorrow.

“The Federal Government has already introduced a new policy that will cause serious problems.”

Blessing Olasode, an automobile car dealer operating from Lagos, also confirmed that implementing the FOB would triple the duty costs added to the existing ones.

He explained that most middle-class Nigerians would no longer be able to afford vehicles too as they would be pushed out of the market.

“For instance, to clear a car worth N12.5 million, the new 4% levy alone adds N500,000, compared to N125,000 under the previous 1% CISS rate,” Olasode told FIJ on Thursday.

“This policy will make cars unaffordable for the middle class. We already struggle with exchange rates and duty hikes, and this just adds another layer. The average Nigerian may no longer be able to afford a decent car.”

Olasode noted that this would have a ripple effect on the economy as different manufacturers who depend on imported materials would no longer find them affordable.

“Manufacturers who depend on imported materials will feel it too. If clearing costs increase, production slows down and prices rise. The ripple effect will be felt across the economy,” the car dealer explained.

“They say this new 4% charge is just replacing the old 1% fee, but that’s not true. The 7% surcharge is still there, so instead of paying less, we’re now paying more. It feels like double taxation.

“Customs is calling it a consolidation, but for us importers, it’s just extra cost. There’s no real reduction anywhere. They’ve only added more burden and made it harder for people like us to do business.”

Adedimeji Adekanbi, a car importer in Ibadan, the capital of Oyo State, said that they were already being pushed out of business, but implementing the 4% FOB would push them farther away.

He told FIJ that the cost of clearing an average car with the NCS had already jumped from N750,000 to more than N3 million, and that the policy would make things worse.

“Before this 4% FOB tariff, things were not easy for shippers. This is because when we bought cars only a few years ago, we could clear them with N750,000, but not anymore,” Adekanbi said.

“Currently, it takes more than N3 million to clear a vehicle. If they now add the 4% to it, the prices of vehicles would never remain the same.

“Vehicles that sell for N14 million would now cost around N17 million.”

The Ibadan car dealer noted that most of the cars imported into Nigeria with thousands of dollars were often not in good condition.

He said, “I can’t buy a car between $3,000 and $4,000, get it into Nigeria and pay over $1,000 to clear it. It is not even like the vehicles are in good shape.

“They are ‘Tokunbos’ and not brand new. You will still spend a lot of money to fix them. Putting all this into consideration, it is going to be difficult for both shippers and buyers.

“Nobody will be able to buy cars at all, and the market will be very dull. Without the 4%, people were not buying cars the way they did back then.”

On the other hand, Olanrewaju Yusuf, a clearing and forwarding agent operating from Lagos, told FIJ that no one can predict the implications of the new policy until it took full effect.

He stated that the payments made to NCS are already split into four categories, and the agency might eliminate one or more to make room for the new tariff.

“The 4% FOB is yet to be implemented. From what I know, we already pay about four to five different categories of import duties and what I heard is that they might replace one or two of these import duties with the FOB,” Yusuf told FIJ on Thursday.

“But again, I was hearing that what they said they won’t eliminate any original tariff, and the 4% will only be added to the usual payments.

“We freight forwarders, clearing and forwarding agents, will only know whether it is favourable or not when it takes effect.”

Yusuf explained that while agents and importers were yet to know the effects of the FOB policy, local production might also take a hit as manufacturers would no longer be able to afford raw materials.

“Speaking of it boosting the local economy, we don’t even have our own cars in Nigeria. We only assemble them here and never manufacture. Those vehicles with ‘Made in Nigeria’ labels have their spare parts shipped from abroad,” Yusuf continued.

“So, the conversation of it boosting local production might be far-fetched because it could lead to low purchasing power for these assembling plants and more costs for the buyer.”

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Meanwhile, Isah Jibrin, chairman of the National Assembly Joint Committee on Customs and Tariffs, insisted that the 4 % FOB should be immediately implemented as the revenue was needed to support NCS operations.

In October 2023, FIJ reported how buying a car was already out of reach for average Nigerians. At the time, most people could only own a vehicle such as a Toyota Camry 2008 model, which cost N6 million.

Higher duties and levies automatically increase the cost of importation, and automobiles won’t be the only shipped items Nigerians would struggle to buy.

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