Prices seen rising as Customs imposes 4% FOB charge on imports

Importing goods into Nigeria is about to get more expensive, as the Nigeria Customs Service has imposed a four percent charge on the Free On-Board (FOB) value of imports, a decision that has already raised concerns among businesses struggling with high operating costs.

The FOB charge, which is calculated based on the value of imported goods, including transportation costs up to the port of loading, is supposed to serve “as a measure to enhance the agency’s operational efficiency,” Bashir Adeniyi, the comptroller-general of the Service said in a statement.

Higher import costs mean importers will pay more to bring goods into Nigeria, a cost that will likely be passed on to consumers.

According to the National Bureau of Statistics (NBS)’s Foreign Trade in Goods Statistics Q3 2024, machinery, refined petroleum, vehicles, cereal, and pharmaceuticals are some of the most imported products to Nigeria, with machinery–which is essential for industrial and manufacturing processes–accounting for approximately 20 percent of imports.

Since many of these imports are already expensive due to foreign exchange challenges, an additional charge makes them even pricier.

For a car valued at N30 million, a four percent increase in FOB will add an extra N1,200,000 to its value, which will push up the cost of payable import duties. Duties imposed range from five percent to 35 percent of the car’s value, according to NCS data, depending on the type of car and its engine capacity.

The same applies to imported machinery. FOB charge increases the Cost, Insurance, and Freight (CIF) value, which serves as the basis for calculating import duties and Value Added Tax (VAT). A higher CIF value further escalates the overall cost of importing machinery.

The pharmaceutical sector is not exempted. Despite an executive order removing import duties on certain medicines last year, the four percent FOB charge still applies to import costs.

While importers may not pay import duties, the cost of the goods will still be slightly higher due to this charge, which could influence the final pricing of pharmaceutical products in the Nigerian market.

The decision to raise the FOB charge has already raised concerns among stakeholders, particularly regarding the simultaneous collection of the one percent Comprehensive Import Supervision Scheme (CISS) fee.

The CISS fee, originally introduced to fund Nigeria’s Destination Inspection Scheme, is still being enforced alongside the newly introduced FOB charge, leading to increased financial strain on importers and businesses that rely on foreign goods.

With Nigeria already grappling with inflation and a weak naira which has raised prices of commodities, businesses fear that the new charge could exacerbate economic pressures, particularly in sectors heavily dependent on imports.

The Association of Nigeria Licensed Customs Agents (ANLCA) has frowned at the sudden introduction of the charge and appealed for an immediate withdrawal. “[The NCS] must not be made a major revenue generating agency to the detriment of agonising Nigerians under a skyrocketing inflation,” said Emenike Kingsley Nwokeoji, the association’s president.

The NCS assured that discussions are ongoing with the Federal Ministry of Finance to “address all agitations raised” by industry players and importers.

In a statement, the NCS urged stakeholders to support what it described as a “legally binding initiative,” in line with the provisions of Section 18 (1) of NCS Act of 2023.