The Nigeria Customs Service (NCS) has announced a suspension of the recently implemented 4% Free-on-Board (FOB) levy on imports, a move that comes as a welcome relief to businesses and consumers alike. This levy, enshrined in Section 18(1)(a) of the Nigeria Customs Service Act 2023, was designed to replace the previous 1% Comprehensive Import Supervision Scheme (CISS) and contribute towards the modernization and operational funding of the NCS. However, its introduction sparked widespread criticism and concern, particularly from the business community, who argued that it would further exacerbate the already challenging economic climate and burden consumers with increased prices. The suspension provides a crucial window for the NCS to engage in comprehensive consultations with stakeholders, including the Minister of Finance, to address the concerns raised and refine the implementation framework of the Act.
The decision to suspend the FOB levy is directly linked to the expiration of existing contracts with service providers, particularly Webb Fontaine, who were previously funded through the 1% CISS. This presents a strategic opportunity for the NCS to conduct a thorough review of its revenue generation mechanisms and ensure alignment with the broader economic goals of the nation. The initial rationale behind the 4% FOB charge, as outlined by the NCS, was to address operational inefficiencies and funding gaps created by the previous separate collection of the 1% CISS and 7% cost of collection. The new Act aimed to consolidate these charges, ensuring a more sustainable funding stream for critical customs operations and modernization initiatives.
The NCS maintains that the 2023 Act provides a robust framework for enhancing its operational efficiency and effectiveness through the adoption of various technological innovations. These include the development and maintenance of electronic systems for seamless information exchange with other government agencies and traders, as stipulated in Section 28 of the Act. The implementation of a Single Window system (Section 33), risk management systems (Section 32), non-intrusive inspection equipment (Section 59), and electronic data exchange facilities (Section 33(3)) are all key components of this modernization drive. The suspension period will allow the NCS to refine these technological advancements, ensuring optimal performance and integration with the new funding model.
The NCS has already begun implementing some of these digital solutions, including the recently launched ‘B’Odogwu’ clearance system. This system promises faster clearance times and improved transparency, directly benefiting stakeholders involved in import processes. The temporary halt on the FOB levy will enable the NCS to gather further feedback on the effectiveness of these systems and make necessary adjustments before full implementation of the new Act. This iterative approach demonstrates a commitment to stakeholder engagement and a willingness to adapt to the evolving needs of the trading community.
While the suspension provides a temporary reprieve, the underlying need for a sustainable funding mechanism for the NCS remains. The previous system, according to the NCS, created operational challenges that hampered its ability to effectively fulfill its mandate. The 4% FOB levy, although initially met with resistance, was intended to address these challenges and ensure adequate resources for essential customs operations, including border security, trade facilitation, and revenue collection. The consultations during the suspension period will be crucial in finding a balance between the need for increased revenue and the potential impact on businesses and the wider economy.
The NCS has reaffirmed its commitment to implementing the provisions of the 2023 Act in a manner that effectively balances its revenue generation mandate with the interests of its stakeholders. The outcome of the consultations will determine the revised implementation timeline for the FOB levy and other provisions of the Act. This collaborative approach is essential to ensuring that the new funding model is both sustainable and conducive to a thriving business environment. The NCS aims to create a system that not only strengthens its operational capacity but also facilitates smoother trade processes and contributes to the overall economic growth of Nigeria. The focus on stakeholder engagement and ongoing dialogue signifies a positive step towards achieving this goal.
