Customs announces suspension of 4 percent FOB tax
Customs CG Adeniyi
Following the uproars that greeted the implementation of a 4% Free-on-Board (FOB) value on imports by the Nigerian Customs Service as provided in Section 18(1)(a) of it NCSA 2023, the federal government has ordered the immediate suspension of the implementation.
The development follows what the service said is an ongoing consultation with between the Minister of Finance and Coordinating Minister of the Economy, Mr. Olawale Edun and stakeholders who condemned the move to commence the exercise.
The Customs Service said the suspension will enable a comprehensive stakeholder engagement and consultations regarding the Act’s implementation framework.
On Monday, February 10th, the Customs Service came under attack from the Nigeria Employers’ Consultative Association (NECA) over the introduction of the 4% Customs Administration Charge on Free on Board (FOB) value.
The employers’ body noted that the new charge contradicts the ongoing tax reform efforts being championed by the Presidential Fiscal Policy and Tax Reforms Committee chaired by Taiwo Oyedele with the aims to harmonize taxes and support business sustainability.
NECA’s Director-General, Mr. Adewale-Smatt Oyerinde bemoaned the new tax regime stating that “the Nigerian business environment is already burdened with multiple taxes, unpredictable policies, and economic challenges. With rising unsold inventories and growing unemployment, policies should support businesses and not further strangulate them.
But the Customs said the timing of the suspension aligns with the exit of the contract agreement with the service providers, including Webb Fontaine, which were previously funded through the 1% Comprehensive Import Supervision Scheme (CISS) and that it presents an opportunity to review the Customs revenue framework holistically.
An electronic statement by the Customs National Public Relations Officer, Abdullahi Maiwada, an Assistant Comptroller of Customs explained that “Under the previous funding arrangement repealed by the NCSA 2023, separating the 1% CISS and 7% cost of collection created operational inefficiencies and funding gaps in customs modernisation efforts.”
“The new Act addresses these challenges by consolidating “not less than 4% of the Free-on-Board value of imports,” designed to ensure sustainable funding for critical customs operations and modernisation initiatives. This transition period will allow the Service to optimize the management of these frameworks to serve our stakeholders and the nation’s interests better.”
Maiwada further said “The Act further empowers the Service to modernise its operations through various technological innovations. Specifically, Section 28 of the NCSA 2023 authorises developing and maintaining electronic systems for information exchange between the Service, Other Government Agencies, and traders.”
“The Service is already implementing several digital solutions, including the recently deployed B’Odogwu clearance system, which stakeholders are benefiting from through faster clearance times and improved transparency. Other innovative solutions authorized by the Act include; Single Window implementation (Section 33), Risk management systems (Section 32), Non-intrusive inspection equipment (Section 59) and electronic data exchange facilities (Section 33(3).”
It said “The suspension period will allow the Service to further engage with stakeholders while ensuring proper alignment with the Act’s provisions for sustainable funding of these modernisation initiatives.
The NCS remains committed to implementing the provisions of the Act in a manner that best serves our stakeholders while fulfilling our revenue generation and trade facilitation mandate. We will communicate the revised implementation timeline following the conclusion of stakeholder consultations.” the statement read.
