Customs’ N2.29trn annual waivers surpass revenue by 71%

The Nigerian government granted waivers, incentives and exemptions worth N2.296 trillion in 2021 to different institutions through the Nigerian Customs Service (NCS), data from the country’s Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) 2023-2025 have shown.

NCS’ total revenue collection in 2021 was N1.34 trillion, according to the document, which implies that the total waivers granted by the Nigerian government surpassed its total revenue by 71.3 percent, BusinessDay’s analysis has revealed.

Waivers, incentives and exemptions are granted for different strategic reasons. According to the report, the beneficiaries in 2021 were the diplomatic community in Nigeria, armed forces, airlines and some unique healthcare service providers.

In addition, the waivers and incentives granted in 2021 represented an increase of 194.5 percent when compared with N779.73 billion worth of waivers and exemptions granted in 2020, the analysis showed.

“The exemptions applied to imported goods covered by diplomatic privileges, military hardwares, fuels, lubricants, hospital surgical equipment, aircraft parts and ancillary equipment, machinery imported for use by companies in export processing zones, health and medical supplies to abate the spread of COVID. Other exemptions include reliefs on presidential initiative on COVID-19 supplies, import duty and VAT on commercial airlines,” the document said.

The waivers and incentives were implemented through reduction or outright cancellation of the payment of import duties, surcharge (7 percent of import duty), common external tariff levy, comprehensive import supervision scheme, ECOWAS trade liberalisation scheme, iron levy, National Automotive Council levy, and VAT.

According to the report, the waivers and incentives received under the Common External Tariff (CET) Levy rose the most in 12 months. From N223.99 billion waivers granted under CET in 2020, it rose to N1.419 trillion in 2021, representing an increase of 533.6 percent, and accounted for 62 percent of the total waivers and incentives granted in 2021.

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Waivers that were granted through the Comprehensive Import Supervision Scheme increased by 350.4 percent to N130.04 billion in 2021, up from N28.87 billion in 2020. The waivers granted under the ECOWAS Trade Liberalisation Scheme were up by 278.6 percent to N72.91 billion in 2021 as against N19.26 billion in the previous year.

Both the import duty and surcharge (7 percent of import duty) increased by 42.6 percent and 42.7 percent respectively. The former rose to N435.84 billion in 2021 from N305.65 billion in 2020, while the latter increased to N30.38 billion from N21.28 billion.

“Exemptions, waivers and incentives are given by the Federal Government through the Federal Ministry of Finance. Nigeria Customs Service only implements them. Those waivers are given to the diplomatic community, which is the standard anywhere in the world, and to players in sectors that are of interest to the Nigerian government, especially if the government wants those sectors to create more jobs in the country,” Timi Bomodi, national public relations officer of the NCS, said.

He added that approval for waivers and other exemptions are now implemented electronically with the order indicating the names of the beneficiaries, types of goods, quantities, values and destinations.

“The exemptions are in order to the extent that there are no proven cases of abuse or wrong declarations. It is best practice to exempt diplomatic consignments, items of aid, inputs and machineries for strategic sectors of the economy from duty payments,” Muda Yusuf, CEO of Centre for the Promotion of Private Enterprise, said, saying the idea was to reduce production and operating costs of key social and economic sectors in the country.

Exemptions via Value Added Tax followed the same trend as it increased by 15.9 percent from N179.60 billion in 2020 to N208.24 billion in 2021.

However, the waivers granted to players in the automotive sector declined by 96.2 percent to N41.4 million in 2021 from N1.08 billion in the previous year. The reduction may not be unconnected with the rise in the number of players in the industry in recent years, which is an indication that the business environment of that sector is improving.

“With the introduction of the National Automotive Industry Development Plan, there has been increased activity in local vehicle assembly. The National Automotive Design and Development Council granted 35 companies licences to assemble/produce vehicles. Several Original Equipment Manufacturer representatives have begun plans to set up assembly operations to take advantage of the policy,” PwC said in its report entitled ‘Africa’s Next Automotive Hub, Reality Check.’