With all indications, the Nigeria Customs Service may have been dealt a great blow by the January 1st, 2021 commencement of the African Continental Free Trade Agreement (AfCFTA) and the World Trade Organisation (WTO) Free Trade Treaty.
Even though the policy is applauded for boosting trade activities by permitting zero duty for all imports coming from member countries within Africa and import coming from African countries, the Nigeria Customs Service is not sharing the same narrative as recently in a budget defence meeting hosted by the Federal House of Representatives, its Comptroller-General, Colonel Hameed Ali lamented that the coming into effect of the different trade policies may affect revenue collection of the service in 2021.
This statement by the Comptroller General portends that the Nigeria Customs Service may not be the highest contributor to the Nigerian economy in terms of Internally Generated Revenue by a government agency this year.
The argument of the Customs boss before the House Committee on Customs and Excise is based on the premise of the agreements tended towards zero duty for goods imported from member countries who are signatories to the two agreements.
On yearly projection increment
Before the customs prediction of a shortfall, the House of Representatives through the Chairman of the Committee, Hon. Leke Abejide aimed at increasing the revenue target for NCS from ₦1.4 trillion to ₦1.6 trillion. This according to the lower chamber of the National Assembly is due to the sterling performance of the Customs last year irrespective of the Covid-19 pandemic.
In reaction to increasing its revenue projection from ₦1.4 trillion to ₦1.6 trillion, the Nigeria Customs Service argued that any increment at this point with the commencement of the free trade agreements will be unrealistic. The NCS in an optimistic light opened that if the agency realizes more than projected, it will remit.
In his words
“On the issue of increasing the 2021 budget from ₦1.4 trillion to ₦1.6 trillion, let me say that the target set by the Federal Government is based on some parameters and not based on actual computation.”
“The budget committee sits down and take a look at it and do a projection and with our officers, we sit down and look at what is feasible that can be generated. I make haste to say that in 2020, we were lucky that despite the COVID 19, we were able to garner what we got. As of then, the Africa Continental Free Trade Agreement had not come into place.
“It has taken effect from January 1, 2021, and that agreement if geared towards zero duty for all imports coming from member countries within Africa and import coming from African countries is of a significant percentage of the duty collection that we do.
“Second, if you recall when Mrs Ngozi Okonjo Iweala came here, she mentioned the WTO agreement which has also come into effect and we are a signatory to that treaty. What it is also gearing towards is zero duty on import from member countries.
“We must consider this. We are praying that COVID subsides because the vaccine is getting on very well even though many Nigerians are shying away from it. A lot of industries outside Nigeria have suffered tremendous injuries with regards to COVID and so, picking up and producing for our people to buy will take a longer time.
“Putting all these together, we will crave the indulgence of this committee to understand that we rather trend on a fairground than to be in haste. We need to take it slowly. During the COVID, our target was reduced to ₦1.3 trillion and by the grace of God, we were able to meet the target.
“We hope that if we get anything above ₦1.4 trillion, it will reflect in the collection. I don’t want us to set the target too high and then find it difficult to meet. These agreements that have taken effects will impact our revenue collection because it is zero duty and we cannot enforce it beyond that. I don’t want us to be too ambitious only to fall short of expectation.”
The House of Reps Argument
The House of Representatives expressed however expressed optimism despite the outcry of the Nigeria Customs Service and this optimism is based on the NCS’ ability to generate ₦1.5 trillion in 2020 amidst the COVID 19 pandemic.
Hon. Abejide projected that the NCS should be able to meet up with a ₦1.6 trillion target irrespective of any underlying factor.
In his words,
“We have taken a look at the 2021 proposal that Customs brought to us. We have compared it with what was presented to us in the 2020 fiscal year and what was collected by the service and discovered that you have a target of ₦1.4 trillion as revenue for 2021.
“When we looked at your new proposal and the kind of noise it will generate when we get to the floor of the House, we are convinced that there will a serious issue. We don’t want to have a problem on the floor trying to pass the budget.
“So, when we looked at what you collected in 2020 which was ₦1.562 trillion including VAT, it will look somehow illogical for us to give you a target that is below what you generated in 2020.
“Before COVID came, the sum of N1.6 trillion was given to the service as a target. It was later reduced to ₦1.3 trillion because of the COVID. Despite the COVID, you were able to generate ₦1.2 trillion and collected about ₦350 billion VAT.
“We want to stand on the initial target given to you last year which is ₦1.679 trillion. We are also not going to touch the target of ₦370 billion you gave to yourself on VAT. We hope that you will be able to meet this target that you set for yourself.
“The finance Act has reduced level on new vehicles from 35 per cent to five per cent which means that you will be getting more vehicles to come through the port this year. When your add all these, it is possible that you will be able to meet this target”.
The Nigeria Customs Service despite the outbreak of the Covid-19 pandemic declared that it had generated a revenue of ₦1.5 trillion for the year 2020, a rise compared to ₦1.3 trillion in 2019.