MAN Urges NCS to Rescind Plans to Re-Introduce 4% Free On-Board Levy

The Manufacturers Association of Nigeria (MAN) has raised alarm over the reported plans by the Nigeria Customs Service (NCS) to re-introduce the 4% Free-on-Board Levy.

The Association cautions against this inauspicious development because of the inevitable catastrophic impact it will have on the manufacturing sector in particular the business community and the people of Nigeria in general.

According to the statement signed by the Director General, MAN, Segun Ajayi- Kadir, mni, the Association views this new development as an unfortunate and retrogressive one, claiming that the extensive stakeholder engagement promised has not been inclusive and quite importantly, has not taken into consideration the affected stakeholders, which to a large extent, are manufacturers.

MAN, however, opined that the overwhelming opinion of the stakeholder engagement would have dissuaded the Service from implementing the levy and proffered a more progressive and sustainable option for increased revenue for the NCS and government.

Ajayi-Kadir maintained that if implemented, this will be an additional burden to the 1% Comprehensive Import Supervision Scheme (CISS) fee being paid by its members at a time that all Government agencies should be seeking ways to de-escalate cost of doing business in Nigeria, as it is being done in other climes and economies.

Director General of MAN, stated “It is equally worrisome that this is coming at a time when there is still a looming danger of the unwarranted 15% hike in port charges; our members are struggling with the astronomical increase in the effective import duty calculations rate. and contending with unprecedented rise in the cost of energy.

“We had expected that the NCS would ultimately rescind the move to introduce the evidently unpopular and ill-timed levy. We didn’t expect to read on the pages of newspapers that the levy will be reintroduced, even before the promised wide consultation with stakeholders like MAN and other private sector organizations. We admonish that the decision should be put away before it worsens and degenerates into an economic quagmire.”

He reiterated that what was needed at this time was the prioritization of improved trade facilitation that would mitigate the prevailing constraints militating against the optimum performance of the productive sector.

DG MAN postulated that, given the prevailing economic downturn, the imposition of the levy would only exacerbate the spiraling cost of production and ultimately compound the dissipating disposable income of the average Nigeria.

“We had expected that, in line with the prevailing economic reform agenda of the government that seeks to streamline fiscal policies and engender a progressive and business friendly tax regime, we should be experiencing a demonstrated aversion to introduction of fees and levies by government agencies and institutions. This is the time for all government institutions to recommit to the reduction of the cost of doing business; expanding the scope of businesses and incentivizing new entrants in the face of high business mortality,” DG MAN emphasized.

The Association, which had earlier kicked against this planned levy for the umpteenth time reiterated the unassailable reasons why the levy should not be implemented thus: “The already high cost of importation due to the prevailing exchange rate used in calculating the customs duty will further escalate. This is evident in the cost which had earlier jumped by over 118 percent from ₦2.07 trillion in the first nine months of 2023 to ₦4.53trillion in the same period of 2024.

“The levy will cause heavy disruption in the supply chain, trigger raw materials stock-out in many manufacturing concerns, inflict higher cost of demurrage, further increase the huge volume of unsold inventories and worsen the competitiveness of Nigerian manufacturers.

“The levy is coming at a time when the headline inflation has hit a historic record of 34.8 percent in nearly three decades and the majority of Nigerians are struggling. Therefore, the impact on the cost of locally produced items will be instant and far reaching.

“The introduction of the levy contradicts the principles of the ongoing Fiscal Policy and Tax Reforms and the spirit behind the tax bills currently being considered by the National Assembly. These efforts are targeted at eliminating multiplicity of taxes and reduction of tax burden for households, manufacturers and other private businesses.

“As an addition to the existing 1% CISS fee, extant duties and other cargo clearance charges, the new Customs Operations levy will increase import transaction costs, compounding the already high cost of doing business significantly.

“The re-introduction of the levy is an additional incentive to smuggling, trade diversion, under declaration of duty and other trade infractions that has bedeviled our country, stretched the capacity of our Customs Service and undermined the revenue profile of the country.

“It will jeopardize the plan of the Federal Government to boost forex earnings through non-oil export, as many manufacturing exporters rely on imports for vital inputs and machines that are not available locally.

“The levy will jeopardize our aspiration to be an investment destination of choice and an industrial hub in the West African sub-region.”

The Association implores the Federal Government to urgently direct the Nigeria Customs Service to jettison the idea of the re-introduction of the 4% Free-on-Board Levy.

The Association affirmed that it is imperative to warn that the Nigerian manufacturing sector is increasingly being burdened beyond its well-known resilience thresholds, adding “the results of our quarterly manufacturers CEO confidence index has continued to show less optimism about the outlook of the sector. De-industrialization stares us in the face.”

“We should not be heading in a different direction when most governments across the world are aggressively promoting their industrialization agenda and pushing highly nationalist agenda to grow their domestic production,” Ajayi-Kadir cautioned.