The Nigeria Employers Consultative Association (NECA) has lauded the Minister of Finance and Coordinating Minister of the Economy, Wale Edun for his intervention in the suspension of the 4 percent Free-on-Board (FOB) levy on imports.
The levy recently introduced by the Nigeria Customs Service had drawn criticism from various stakeholders, including NECA, Manufacturers Association of Nigeria ( MAN) and freight forwarders, prompting the NCS to announce it’s suspension on Tuesday.
NECA Director General, Adewale Oyerinde, speaking on a television program, monitored by Maritime Today Online acknowledged the government’s responsiveness, stating, “I think the suspension of the levy shows that the government is listening, and that shows our argument also is making sense.”
He pointed out that with Nigeria’s annual imports estimated at N71 trillion, the 4% levy would impose an additional N2.84 trillion in costs.
He said notwithstanding the argument by Customs on the need for the implementation of the levy as stipulated in the new Customs Act, it is imperative to balance revenue generation with the overall health of the economy.
He explained that increased import costs, especially for goods without local substitutes, directly impact businesses, which costs in turn are passed to consumers, whose purchasing power is already strained.
He said, “Making over N2.8 trillion is quite attractive in the context of revenue generation. However, we feel we need to balance the need for revenue with the need for the general good of the economy.
“For an average business, as we’ve seen, when the cost of doing business increases, the cost of import increases, especially for imports where you don’t have substitutes. If we have effective backward integration, we have local substitutes for those imported goods, we can say, look, let’s increase the FOB to 10% to deter importation, so that people can focus on maximizing local production.
“But in the instance where you don’t have such, the moment you increase any kind of cost, naturally, we do two things. One, increases the cost of doing business. And the business, because it has to meet its cost of production, cost of services, will directly or indirectly pass the cost to the consumer.
“The consumer, whose purchasing power has already been hit by so many factors, will also have challenges purchasing. It also falls back to the business, because the business will probably have unsold stocks and will decide to retrench. And the more the business retrenches, the more you are feeding the context of insecurity.”
Oyerinde stressed the importance of consultation and considering the current economic realities when implementing such policies.
He suggested that suspending the levy until economic conditions improve and businesses can absorb the costs without passing them on to consumers might be a more prudent approach.
“So we feel there needs to be a balance, and we are glad, consciously glad that the minister stepped in and helped. All those that have stepped in, we really appreciate their stepping in, but there needs to be more consultation. And beyond the need for a review, beyond the need to apply the law, we should also look at the law within the context of our reality.
“Applying the law in whatever context will it serve the general good of Nigerians at this current state? We shouldn’t be shy of suspending this kind of law until things progressively improve and businesses can actually accommodate this cost without passing it to consumers,” he said.
Oyerinde further added that while customs revenue is intended for public services and infrastructure, overtaxing businesses can be counterproductive.
He urged the government to focus on enabling businesses rather than solely focusing on revenue generation through regulatory agencies.
He suggested that regulators should be assessed based on how many businesses they enable, rather than the revenue they generate, sometimes through penalties.
“The moment an agency focuses more on revenue generation. It loses its core objective of regulating that business environment.
“So rather than regulate, it will focus more on penalties because they are under pressure to generate revenue.
“Let the parameter for assessing the regulator be, how many businesses do you enable because the more you enable businesses, we don’t need to travel around the world looking for foreign direct investors. The more these businesses are enabled here, they become the mouth piece of government, that this environment is conducive for business to thrive, ” he said.
