The Nigeria Employers’ Consultative Association (NECA) has issued a stark warning against the newly implemented four percent Free On-Board (FOB) valuation levy on imports by the Nigeria Customs Service (NCS). NECA contends that this levy will impose a staggering additional cost of N2.84 trillion on businesses, exacerbating the already challenging economic conditions faced by Nigerian citizens. This figure is derived from applying the four percent levy to the country’s estimated annual import value of N71 trillion. NECA’s Director-General, Adewale Oyerinde, argues that this levy is a counterproductive measure that will stifle economic growth, increase inflation, and deepen poverty by significantly increasing the cost of doing business, particularly for industries heavily reliant on imported raw materials.
The core of NECA’s argument rests on the detrimental impact this levy will have on businesses and the broader Nigerian economy. For industries dependent on imported raw materials, this new charge translates to an 80% increase in duty payments. This substantial increase in import costs will inevitably be passed on to consumers, driving up the prices of goods and further fueling inflation. This inflationary pressure will, in turn, erode the purchasing power of Nigerian consumers, exacerbating existing economic hardships. Moreover, the increased cost of production will make Nigerian businesses less competitive, potentially leading to decreased output, business closures, and job losses. This chain reaction of negative consequences paints a grim picture of the potential economic fallout from the implementation of this levy.
NECA’s Director-General has characterized the FOB valuation levy as “ill-timed and detrimental,” highlighting the already burdensome nature of the Nigerian business environment. Businesses grapple with multiple taxes, unpredictable policy changes, and challenging economic realities. Adding another layer of financial burden through this levy, NECA argues, will further stifle businesses struggling with unsold inventories and contribute to the growing unemployment rate. Instead of implementing policies that hinder economic growth, NECA advocates for measures that support businesses and create a more conducive environment for investment and job creation. The levy, in NECA’s view, runs counter to the government’s efforts to ease the cost of doing business and improve the investment climate.
Furthermore, NECA criticizes the NCS for seemingly prioritizing revenue generation over its core mandate of trade facilitation. This focus on revenue, NECA argues, is misdirected and counterproductive, as it undermines the government’s stated Ease of Doing Business agenda. While acknowledging the government’s need to generate revenue, NECA emphasizes that achieving this objective should not come at the expense of businesses and the overall economic well-being of citizens. The association contends that the NCS, driven by the National Assembly’s revenue target of N10 trillion for the 2025 budget, has resorted to the FOB levy as a desperate measure to meet projections, disregarding the potentially devastating impact on businesses and the economy.
NECA also points out the inconsistency between the new levy and the ongoing tax reforms being spearheaded by the Presidential Fiscal Policy and Tax Reforms Committee. These reforms aim to harmonize and simplify the tax system, creating a more transparent and efficient tax regime. The introduction of the FOB levy, NECA argues, directly contradicts these efforts by adding another layer of complexity and cost to the tax system, sending a negative signal to potential investors. This contradictory approach raises concerns about policy coherence and undermines the credibility of the government’s commitment to tax reform.
In conclusion, NECA has strongly urged the government to immediately reverse the implementation of the four percent FOB valuation levy. The association emphasizes the need for a more sustainable approach to revenue generation that does not jeopardize the viability of businesses and the welfare of Nigerian citizens. NECA recommends that the government engage in meaningful dialogue with stakeholders to develop a more balanced and effective revenue strategy that supports economic growth and alleviates the financial burden on businesses. They contend that reversing the levy is crucial for fostering a more conducive business environment, promoting economic growth, and improving the livelihood of Nigerians. This dialogue, NECA suggests, should prioritize policies that ease the financial strain on businesses and citizens, paving the way for a more sustainable and inclusive economic future.
