Experts have warned that the Federal Government’s intention to reduce the import duty on used vehicles, widely referred to as Tokunbo, to 5 per cent is unlikely to come without trade-offs.
But the levy decrease has been lauded by analysts and industry operators as a timely action that might help lower transport costs and provide some much needed respite for Nigerians fighting relentless inflation, according to Daily Independent.
Analysts say the policy could also signal a period of closer scrutiny at the nation’s ports as the Nigeria Customs Service (NCS) beefs up efforts to hit its lofty N11 trillion revenue target. Africans & Diaspora
The lower tariff is intended to decrease the landing costs of imported automobiles and lessen pressure on transit rates. But experts warn that the fiscal concession is unlikely to come without trade-offs.
Dr Muda Yusuf, Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), remarked, “There is no such thing as a free fiscal lunch.” Yusuf argues that most governments compensate tax cuts with stricter compliance methods and plug revenue leakages.
The reduction in tariff is laudable as it takes care of the affordability problem facing a lot of Nigerians.
But of course Customs will strengthen enforcement to ensure that all rightful revenue owing to government is collected. “We are going to have more stringent checks on documentation, valuation and compliance for importers,” he said.
The cut comes at a time when inflation has hit household incomes hard and higher fuel prices and exchange rate volatility have pushed up transport costs to record levels.
The fall in the value of the naira has also raised the cost of imports, pushing vehicle prices sky-high in the last two years and making it ever more impossible for middle-income Nigerians to acquire a car.
Removing import duties could boost demand, make vehicles more affordable and lower operating costs for commercial transporters and small businesses, economists say.
Bismarck Rewane, Managing Director, Financial Derivatives Company Limited remarked that fiscal actions that cut the cost of producing assets are generally good for the economy.
Reducing import duties on vehicles may help ease transportation costs, but the key is implementation, he said.
“If implemented transparently, the policy can improve affordability. But the targets for government revenue are not gone.
“Customs will be under pressure to ensure that leakages are eliminated which means compliance monitoring will become much stronger,” Rewane said.
The Nigeria Customs Service has been getting ever more ambitious revenue targets from the Federal Government as authorities seek to boost non-oil revenues amid dwindling fiscal space.
Trade experts said that with the objective of N11 trillion, Customs agents will be more aggressive in tackling undervaluation, false declarations, smuggling and other forms of revenue leakages.
Former President of the Association of National Accountants of Nigeria (ANAN), Dr Sam Nzekwe, said the new fee should be seen as a social intervention and not a financial measure.
“The government is trying to ease the pain on citizens who have been hit by inflation. But Customs has a revenue expectation to live up to, too.
“Therefore importers need to ensure they are fully compliant as enforcement is likely to tighten up,” he said.
Analysts say the message is clear for Nigerians abroad who account for a large share of used vehicle imports into the country: ensure every document is correct before shipping any vehicle.
Operators in the industry hope Customs will pay more attention to invoices, vehicle identification numbers, declarations and valuation records to prevent abuse of the reduced tariff regime.
Dr. Pius Akutah, Executive Secretary, Nigerian Shippers’ Council recently stated that trade facilitation is not just about revenue generation, but that quick cargo clearance is key to decreasing logistical cost. Africans & The Diaspora
Maritime stakeholders say the tariff decrease is welcome but port inefficiencies could eat into much of the intended benefit.
Terminal handling fees, shipping costs, exchange rate fluctuations and long cargo clearance processes are other factors they cite as pushing up the price of vehicles.
President of the National Association of Government Approved Freight Forwarders (NAGAFF), Chief Tochukwu Ezisi, has urged Customs to ensure uniform implementation of the new tariff policy.
“Transparency is the key to the success of this initiative. “If officers interpret the policy differently at different commands, the anticipated decrease in vehicle costs may not be realized,” he said.
“There is no reason why genuine importers should be unduly held up by Customs in pursuit of higher revenue targets,” he said.
The difficulty for policy makers, say economic analysts, is to balance consumer alleviation with fiscal sustainability.
Nigeria still faces high debt service commitments, infrastructure funding demands and expanding governmental expenditure. Africans & Diaspora
In this context, every concession of a tax advantage necessarily cuts a source of government revenue, increasing pressure on revenue-raising agencies to increase efficiency elsewhere.
“This is where technology plays an important role,” continued Yusuf.
“Customs should rely more on digital risk assessment, intelligence and automation instead of multiple physical inspections.
Legitimate traders are not penalised in this way, but those who try to evade duties are identified.”
Analysts also said that if the lower tariff results in a huge jump in vehicle import volumes, the government might recoup some of the lost revenue through increased transaction volumes rather than increased tax rates.
That, they claim, would be a win-win — cheaper costs to customers and higher total revenue collections.
As implementation begins, importers, freight forwarders and auto dealers will be watching intently to see if the anticipated reduction in expenses translates into lower prices in the showroom.
The five percent Tokunbo fee is some respite for millions of Nigerians who have been hit by soaring transit costs. But experts warn importers not to see the compromise as a sign of lessening control.
Compliance will be even more critical as Customs under huge pressure to climb the N11 trillion revenue mountain.
Analysts generally agree that although the administration has reached out a humanitarian hand with lower tariffs, the other hand will almost surely be tightening the screws.
In the next months, the hallmark of Nigeria’s new vehicle import regime is likely to be transparency, correct documentation and strict respect to Customs laws. Africans & Diaspora
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