Slashed import tariffs will cut production cost- Manufacturers

Manufacturers and trade experts predict that the Federal Government’s decision to slash import tariffs on raw materials and machinery will cut production costs, boost input inflows and rejuvenate activity in Nigerian seaports.

“The inflation we are dealing with is fuelled by exchange rate and import duties,” said Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry (LCCI), in a telephone interview.

“So the big thing is that the reduction of import tariff will reduce cost of production for those using them as inputs. The fact is that import duties on quite a number of inputs and products are still very high, especially on the backdrop of high exchange rate,” Yusuf said.

He explained that import duties have ranked among the biggest challenges facing the Nigerian economy, citing the case of cars, for which the duty is 70 percent.

“A new Toyota Camry is now N17 million and Kia soloon cars range between N5 million and N10 million. Why? By the time you pay the 70 percent and other charges, you have between 80 and 90 percent tariffs,” he said.

The Federal Government last week released a circular detailing a reduction in tariffs for some raw materials from ten to five percent.

Some of the raw materials which benefitted include: malt extract, under natured ethyl alcohol for pharmaceutical, organic composite solvents and thinners; mixes alkylbenzenes; and industrial monocarboxylic fatty acids, synthetic staple fibres, semi-finished products of iron or non-alloy steel, stranded wire ropes, grease for treatment of textile materials.

Many of these commodities are inputs in the pharmaceutical, food and beverages, chemical, as well as iron and steel industries.

Machinery and equipment used in sectors such as agriculture, cement, power, iron and steel, solid minerals and textile were also pegged at zero import duty, according to the circular.

“Any raw material required for production that is not readily available in the country can have its tariff reduced. But if it is available in the country in sufficient quantity, you will be killing local industries if you reduce duties,” said Ibrahim Usman, chairman of the Manufacturers Association of Nigeria in the North-West.

“Zero duty on machinery is fantastic, as it will reduce our cost of production. In terms of iron and steel, this reduction is also good because we are still far away from where we should be. We are not yet producing sheet metals and a lot of other products. So this will support rehabilitation of bridges and other infrastructure,” Usman said.

Tony Anakebe, managing director of Gold-Link Investment Limited, a clearing and forwarding company, commended the Federal Government for the move, adding  that the new fiscal measures are good for the manufacturing sector.

“We expect raw materials and agricultural equipment to flood the ports by the second quarter of the year and this will help to boost the volume of business activities in the port,” Anakebe added.

According to Jonathan Nicole, president, Shippers Association of Lagos State, the new measure, if sustained, will enable the key players to participate fully in bringing commodities that would grow manufacturing business in 2017.

The enforcement of these measures, according to him, will bring back shippers’ confidence to Nigerian seaports and also help them re-direct their imports to the country.

“If all the measures are meticulously applied by government agencies operating in the nation’s seaports, there will be minimal increase in import volume in 2017, despite the fact that importation of goods such as cars will be very low due to the current 70 percent import duty placed on vehicles coming through the ports,” Nicole said.

Nicole further observed that the Nigeria Customs Service (NCS) needs to comply strictly with these measures and not bungle the well-articulated procedures laid down by government by extorting money from shippers, which has been the practise in the past.

“The Current Adjustment Import policy meant well. But a lot needs to be done to encourage the shippers of these commodities. One of such is that trade facilitation needs be replaced with revenue target syndrome popularly canvassed by the Customs. Revenue collection targets should be abolished as they negate the World Trade Organisation (WTO) requirements for free trade and movement of traders within the ECOWAS Treaty,” he said.

He further advised the Federal Ministry of Finance to reduce the number of Federal Government agencies in the ports.

Nicole further stated that there is a need to encourage shippers by reducing the cost of doing business in Nigerian ports, especially in the area of reducing and streamlining the shipping and terminal charges, in line with international best practices.

 

ODINAKA ANUDU& AMAKA ANAGOR-EWUZIE