How Customs 15% levy denies Nigerians cheaper cars

Nigerian car dealers and users, who originally would have heaved a sigh of relief with the reduction of import duty on used vehicles from 35 per cent to 20 percent, had their hopes dashed with the reintroduction of the 15 percent National Automotive Council (NAC) levy on imported used cars.

This development has resulted in a fresh round of controversy at the nation’s seaport between the Nigeria Customs Service (NCS), car dealers, and the freight forwarders.

The controversy started after the NCS announced two weeks back that it had reviewed the duty on imported used cars from 35 percent down to 20 percent, but went further to add another 15 percent NAC levy, which enabled the Customs to regain the 15 percent that was reduced from the former import duty on cars.

According to Timi Bomodi, public relations officer at Customs, the new tariff was in line with the tariff adjustments as stipulated in the Common External Tariff (CET) of the Economic Community of West African States protocol, which Nigeria is a signatory to.

With the new policy, car dealers bringing in used cars, popularly known as ‘tokunbo’, into the country would be expected to pay 20 percent import duty plus 15 percent NAC levy, amounting to 35 percent duty.

Giving insight into the issue, Lewis Ogunojemite, a former Customs officer, who faulted the controversial 15 percent NAC levy imposed on imported vehicles, described it as an illegal collection.

He said Customs brought down the import duty on used vehicles to 20 percent from 35 percent “to give the impression that they are complying with the ECOWAS protocol, only for them to go back door to introduce a 15 percent NAC levy in an attempt to retain the old duty rate of 35 percent.”

He said the CET, which the NCS said it wanted to start implementing with the new tariff regime, had been in existence in Nigeria since 2009, but the country never implemented it.

According to him, the CET agreement states that no country will charge more than 20 percent on used cars, but Nigeria had in the past placed a 35 percent duty on imported vehicles, which is wrong.

“It is now in this dispensation that ECOWAS is putting its feet down that Nigeria must comply with the protocol; that was why Customs returned used vehicles to 20 percent and put the 15 percent they removed from the duty as NAC levy,” he said.

Read also: Trouble trails Customs 15% NAC levy on imported used cars

On the NAC levy, Ogunojemite said the policy was formulated to protect the 36 companies registered to manufacture vehicles in Nigeria but some of them were bringing in new vehicles into the country as made-in-Nigeria cars.

He said the NAC policy only recommended a 2 percent levy to encourage local production of vehicles, adding that “the 15 percent NAC levy is an illegal collection that shows the government is playing tricks on its citizens”.

On his part, Kayode Farinto, the national vice president of the Association of Nigerian Licensed Customs Agents (ANLCA), said that imposing a 15 percent NAC levy on used vehicles was an ‘aberration’, and freight forwarders would fight against but not through strikes.

According to him, the levy is supposed to be 2 percent of cost, insurance, and freight on new vehicles or spare parts, and not used vehicles.

He, however, said that ANLCA would be engaging with the Federal Ministry of Finance, which is the ministry overseeing Customs, on the issue.

George Okafor, chairman of the National Association of Government Approved Freight Forwarders PTML chapter, said, “The policy is wrong because Customs is not supposed to calculate the NAC levy on used vehicles. The levy is for new vehicles, and not old or used vehicles.”

This development is coming seven weeks after the suspension of a two-week strike embarked on by registered freight forwarders over the issues around the introduction of the controversial Vehicle Identification Number valuation policy by the NCS.

Many of the aggrieved freight forwarders and car dealers would embark on another strike to protest the new levy at the end of the Ramadan season, said Rilwan Amuni, chairman of the ANLCA Task Force.

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