September 26, 2022

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AN OPEN LETTER TO THE HONORABLE MINISTER OF FINANCE, BUDGET AND FISCAL PLANNING

AN OPEN LETTER TO THE HONORABLE MINISTER OF FINANCE, BUDGET AND FISCAL PLANNING

Minister of Finance, Budget and National Planning Shamsuna-Ahmed

MUCH ADO ABOUT THE FINANCE MINISTER AND THE BOARD OF CUSTOMS

By Dr. Eugene Nweke

Honorable Minister, we the Freight Forwarding Practitioners wishes to use this medium to call your attention on your stipulated responsibilities (duties) as provided under part 2, in section 3 (Establishment, Constitution and Proceedings of the Board), section 4 (Powers and Duties of the Board) and section 5 (Board to be Subject to General Control of the Minister) of the Customs and Excise Management Act. Cap C45.

For emphasis of this modest open letter, the intent is not faulting a possible ignorance of this duties but to observe the non-prompt and strict administrative application and adherence the provisions of the Cema Act, which stipulates that the Chairman of the Board is the Honorable Minister of Finance, while the Comptroller General of Customs is the vice Chairman. The composition of the Board, also includes the CBN, Trade Ministry and some many other critical organs involved in the international trading activities concerned with the exclusion of the freight forwarders in the Board.

For all intents and purposes, the power of the Board under your control as the Chairman Board cannot be over emphasized, and from indications fiscal policies in relation to trade and other administrative functions revolve primarily from the Board, and subsequently, such board decisions influence other arms of fiscal policies formulation. However, our findings in relation to board meetings compositions before most of the recent trade fiscal policies were taken does not clearly point to decisions taken at normal board meeting decisions where the inputs from other related Board members in participatory were soughted.

In view of this consideration, this modest will be addressing our findings and concerns to you in your dual capacity as the Board Chairman and the Honorable Minister of Finance Federal Republic.

OUR OBSERVATIONS ON TRADE TAX POLICIES SO FAR:

From the Freight Forwarders stand point, until the Minister, the Customs and the CBN meets as often as possible to the effective adherence to the premise of the act, the trios would not genuinely encourage trade taxation policies that will promote or allow organizations to invest in smaller, more entrepreneurial companies and seek better returns outside the country.

By this we mean to state that, we support that foreign investment should be taxed by the government, for the sole aim of serving as an incentive to keep or retain the money here at home. By doing so, it will encourage some foreign entrepreneurs to set up shops or cottages here, so as to tap these funds, which are tax free if invested in Nigeria. Equally, there should also be more incentive to invest in high tech, manufacturing or exporting business.

We are aware of a country where a company adheres to the 90% government relaxing rule for investment in small entrepreneurs, which is on the basis of, on a dollar-for-dollar; and for every dollar an investor puts into a small entrepreneur of its country, they can invest a dollar offshore. This type of trade investment policy is desirable in our dear country, especially so, in the face of the AfCTA implementation regime.

Our findings, shows that, it is easier to argue that, ” by government so-called interventions, the Nigeria Manufacturers and Exporters are not at any tax disadvantage compared to some other similar developing nations manufacturers and exporters”.

But the reality is that, our Nigeria manufacturers, exporters and other likened entrepreneurs do not have advantages (a situation where a tax regime waiver is in place, but no enabling environment for its prompt utilization), they are limited by some many contending factors of productivity and marketing.

Ideally, advantages are necessary to offset the fact that Nigeria has such a domestic unstable and unfirmly regulated economy that cannot act as a springboard for the low-cost exports. The consequence being that, a branch plant and products imports franchise economy under the regime of free trade liberalization scheme, merely consists of few foreign owned subsidiaries, making profitable amounts on many trading products above the citizens purchasing power average in the markets.

FINDINGS AND EXPECTATIONS OF THE FREIGHT FORWARDERS:

One of the big expectations from the Freight Forwarders is that, the NCS Board and its Chairman should appreciate better, that other than encouraging and emphasizing more of ‘Product Import Franchise”- (PIF), it should rather see reasons as to be at the forefront to foster and encourage our Nigeria manufacturers and entrepreneurial plants to obtain “World Product Mandate “(WPM) from their parents, allowing them to specialize, lower their costs and export more goods.

We posit so with humility, because our manufacturers and entrepreneurs require a restructured huge tax breaks or even tax holidays, especially for those manufacturers and entrepreneurs who are export business oriented or related.

Our findings also show that tax breaks will give rise to criticism from other business sectors, such as service industries, but the good news is that, at large it will ultimately benefit and afford as many major multinationals and manufacturers the access to the World Products Mandates as a viable alternative. The desire and concern of the Board and its Chairman should not only be limited to the revenue to obtain from the manufacturer and entrepreneurs, but on how to assist them to ensure that the made in Nigeria products flood the international markets.

This could in turn lead to more world products mandates, more exports, and more research and development here in Nigeria. Such tax breaks would increase the debts of our already deficit ridden government, and they would be a bold industrial strategy that could contribute to the nation’s wealth. In addition, it will add impetus to our active participation in the ongoing AfCTA implementation regime. We say this, in the context of the competitive edge of the manufacturers, exporters and freight forwarders in Nigeria.

TRADE TAXATION IS AIMED TO ENCOURAGE AND BALANCE THE IMPORT AND EXPORTING ACTIVITIES OF THE NATION.

Narrowing it down, it is important to emphasize that, though taxation policies may not be able to discourage the paper entrepreneurs, they may be used to encourage the type of entrepreneurs who build projects, who create and export new goods or services export wise.

It is quite understandable to admit that, the past and present government has instituted one tax policy grants or rebates regime and in other forms, but the Freight Forwarders are mostly concerned with a structured and repackaged tax breaks that will encourage exploration or research and development.

In all honesty, it is well known to all that, presently some manufacturers and fewer exporters get some tax breaks in the form of fast write offs, slightly lower corporate taxes, even at that, one cannot handily state of any known “no sales taxes on exports”, of which the Freight Forwarders will appreciate that more be done in this regard.

Here again, may we be quick to posit here, from point of professional experience and stand, which is to say that, our FREE TRADE ZONES capacity and even its essence has been underutilized and untapped, and reasons noted from findings is not too related from a home tailored and real time tax breaks.

FURTHER FINDINGS OF IMPORTANCE AND ADVICE TO THE BOARD AND ITS CHAIRMAN ON OTHER RELATED FISCAL POLICY FOCUS:

Honorable Minister, by way of an advice to your office, the Freight Forwarders, will encourage you to evolve a direct policy that would promote the official establishment of the lobbyists registry and stating clearly the applicable and acceptable guidelines governing lobbying activities in the country. The need to curb abuses in the form of lavishing public paid decision makers with gifts, tips and other benefits (including free flights with all expenses paid) can not be over emphasized.

In addition, there is also a need to evolve a similar policy for ceiling and disclosure rules to govern the political campaigns contributions.

Presently, the applicable rules are spotty and are not effective. As a matter of consideration, the new rules should promote the integrity of our electoral system.

It is also noteworthy to state that, there is a common interplay between economic lobbyists and political gladiators in the context of trade investments and rebates and our findings shows that, most of the contracts awarded in this neighborhood are prone to this unhealthy interplay, which is not too good for a developing economy.

This has become necessary, because findings available shows that concentration activities are on the increase and promotes unhealthy monopoly that deters even economic activities growths. Wherefore, it is pertinent to caution that, there is need for more vigilance to ensure that economic power does not buy further political powers.

Time will not permit the negative effects of the banking and foreign exchange policies with regards to international trading activities of the nation.

It is important to pinpoint that, the Freight Forwarders in this instance, sees this as a most critical concern that requires the attention of the authorities, before the AfCTA implementation gathers momentum.

FREIGHT FORWARDERS EXPECTATIONS AND STRONG VIEWS ON TRADE LOGISTICS SERVICES ADVANCEMENTS:

It is equally important to reinstate that, the core operational essence of the freight forwarding profession is more of deploying his professional expertise towards contributing to the building of the nation’s economy and advancing the technologies in exporting activities and also provides logistics services in the areas of facilitating the clearance of imports into the country.

Let it be stated, that, a fulfilled freight forwarder is one who annually adds up his export activities and contributions to the economic growth the nation’s GDP (gross domestic products), He is fulfilled because he or she has contributed his or her quota in job creations and related auxiliary services thereof, instead of encouraging the widespread of shipping jobs creation to foreign countries through high importation activities into the country. However, the Freight Forwarders are almost helpless under the prevailing circumstances.

CONCLUSION:

Honorable Minister, before penciling down, we observed in your recent directives and not really a fiscal policy statements judging by your application processes, our findings show the following:

  1. The subtle duty benchmarking of traded goods shipped into the country from late last year, was not a function nor inclusive of the government fiscal policy of the year 2021, rather it is a mere but deliberate tax imposition on trade, all in the name of bumper revenue generation without recourse to its attendant consequences to the citizens and the nation’s international trading image.
  2. The Introduction of the VIN application on imported vehicles also took the same processes and application above. The citizens are still grappling with the consequences of the reactions that greeted the Introduction of VIN without adequate consultation and non-observance of experimental processes to this effect.

 

  1. Recently, our findings also shows that your ministry after revaluation and revalidation of the Common External Tariff – CET for a new valid period of applications, in the updated version, your ministry abused the provisions of the general application of the CET, which set across board, the applicable duty rate for imported vehicles at 20%, under a compound HS CODE, but your ministry unilateral added 15 % NAC levy on imported used vehicles and used parts, just a further effort to retain or sustain the prevailing 35% import duty imposition.

Findings shows that this decision was taken without various recourse and variables, not even a recourse to the provisions of the NAC enabling Act, to the extent that, an automobile council levy is above a single digit but two digits levy level. The decision was without concerns to the adverse consequence thereof. Today, another strike action is being contemplated which is not healthy for our economy in the face of congested ports.

Finally, Honorable Minister, there is a need for you to steer the NCS Board effectively and watch closely on the activities of the Central Bank of Nigeria, especially on the aspects of conflicting monetary and fiscal policies applications. Most of these trade fiscal policies being churn out are rather more of imposition without the consent of the legislatures.

It must be strongly emphasized that the international trading environment is highly volatile and fragile, our fiscal policies over the years have not achieved its desired objectives owing to applications and associated inconsistencies (more of changing the goal post when the match is on). We say this, because it is glaring that the nation ‘s balance of trade is still in deficit, even though other contributory factors are responsible, but an effective fiscal trade policy is a major contributor because it is the bedrock.

Going forward we urge you to lax the present policies with the appearance of tax imposition, then please go back to the drawing board, review critical issues and concerns raised in this letter and elsewhere by stakeholders, and make adjustments for the sake of the impoverished consuming public.

We pray thee to live above board. With your effective monitoring and superintendent of the Board of Customs, so many trade related issues will be addressed evenly. Do have a positive consideration in this regard for therein lies the much-needed services to the fatherland especially when and where your actions or inactions has direct impact on larger populace.

Thank You For Your Attention.

Yours in the services to our father land,

Fwdr Dr Eugene Nweke Rff Ksm.

Research Consultant – To The Congregation Of Registered Freight Forwarders Practitioners Of Nigeria.