Businesses in Nigeria including manufacturers have been under intense pressure in the last three months following the Nigeria Customs Service’s effort to meet its N5 trillion annual revenue target.
While Customs recently declared a 122.35 percent increase in revenue generated in the first quarter compared to the same period last year, businesses are in pain and households are deprived of quality purchasing power due to surging inflation.
According to the first quarter performance report, Customs’ revenue increased by 122.35 percent to N1.34 trillion from N606 billion in the same period last year.
Implementation of fluctuating exchange rates for computing Customs duties at the port, which has helped NCS to raise its revenue profile, has also translated into the high cost of doing business for importers and manufacturers.
The situation has worsened the plight of households as people now spend more on commodities and food items owing to the galloping inflation that surged to 31.70 percent in February.
Customs said the exchange rate used in the clearance of goods via the Nigeria Integrated Customs Information System (NICIS) is based on the rate determined by the Central Bank.
Wale Adeniyi, comptroller general of Customs said at the first quarter media briefing, that a total of 28 rates were directed by the CBN, ranging from N951.94 per USD in January 2024 to a peak of N1,662.35 per USD in February 2024.
“While a singular exchange rate of N951.94 per USD was maintained in January, February witnessed 15 different spot rates ranging from N951.94 per USD to N1,662.35 per USD. March saw a total of 13 different spot rates applied, ranging from N1,303.84 to N1,630.16. These fluctuations resulted in an average applied exchange rate of N1,314.03 per USD in the clearance of Customs goods during the quarter,” Adeniyi said.
Shippers have always criticised the government for putting pressure on Customs to generate more revenue, which they say, is supposed to be a trade facilitator rather than revenue generating agency.
Jonathan Nicole, an industry stakeholder, condemned the policy of giving a target to Customs, which he said is pushing NCS to meet the target at the expense of shippers.
“Attaching target to any government agency is a bad policy and precedent. It breeds excessive approach on the one hand to the extent of using para-military force, instead of service as their names depict,” Nicole told BusinessDay.
According to him, Customs is making money from shippers while importers are always in deficit because their business is no longer lucrative.
“Cost of doing business is sky high; cost of clearing of goods in the ports is excessively high and about 150 percent more than it used to be. Our cargo is now moving to other West African Ports with favourable business control,” Nicole said.
The shipping expert called for the protection of shippers and their investments in Nigeria through favourable business policies.
Also speaking, Kingsley Igwe, national secretary of the National Association of Government Approved Freight Forwarders, said Customs adopts fluctuating exchange rates to meet the annual revenue targets given to them by the government.
He said this enables Customs to keep declaring huge revenue to the detriment of businesses despite the slow in trade volume.
BusinessDay check shows that a 40-foot container formerly cleared with N7 million as import duty around August 2022, is now cleared for N18 million due to a high FX duty rate.
For products such as pharmaceuticals, a 40-foot container was cleared with N25 million in the first quarter of the year from N7 million in the same period in 2023 while a 20-foot container was cleared with N12 million from N5 million.
Manufacturers are the worst hit in the whole dilemma because they depend on the port for their critical production inputs and raw materials.
Ijeoma Ezeasor, secretary general of the National Shippers Association of Nigeria, said the liberalisation of the forex market, has set shippers in a state of confusion.
In addition to not being able to make business plans, she said, shippers are losing money and finding it extremely difficult to pay their creditors abroad after selling their goods.
According to her, the warehouses of manufacturers are filled up because Nigerians are not able to purchase locally manufactured goods due to the hike in prices.
“Today, Nigerians spend a lot of money on food and once they no longer have money, it doesn’t trigger buying and manufacturers would continue to have a stockpile of unsold goods in their inventories.
“The situation has become more dangerous for manufacturers in the food sector, because of the short lifespan of those goods. Food producers are in constant fear of their warehouses being burgled by angry Nigerians due to the rising economic hardship,” Ezeasor said.
Citing an example, she said there have been attacks on raw materials such as maize and soya beans in transit from either northern states to their industries or ports to the hinterland.
