The Federal Government, through the Nigerian Customs Service, granted the sum of N2.29tn as Customs’ tax exemptions in 2021, a 194.65 per cent increase from the N779.74bn waivers granted in 2020.
The exemptions included Value Added Tax relief granted on imports, waivers and concessions on import duties, ECOWAS Trade Liberalisation Scheme, surcharges, Comprehensive Import Supervision Scheme, as well as excise and levies.
This is based on information from the Medium Term Expenditure Framework and Fiscal Strategy Paper for 2023–2025. In comparison to the N1.34 trillion in total Customs revenue collected in 2021, the exemption represented a sizable revenue loss, according to the paper.
Across the world, import duty waivers, exemptions, and concessions are used by governments to protect local businesses and jobs, but they can also be abused and become a major drain on the national economy.
Also, import duty waivers are vehicles to meet specific economic goals, especially in protecting local industries, creating jobs, and promoting exports.
The report said, “The exemption applied to imported goods covered by diplomatic privileges, military hardware, fuels and lubricants, hospital and surgical equipment, aircraft (their parts and ancillary equipment), plant and machinery imported for use by companies in export processing zones, health, and medical supplies to abate the spread of COVID.
“Other exemptions include reliefs on the presidential initiative on COVID-19 supplies, import duty, and VAT on commercial airlines. Estimating the tax expenditure on customs and VAT relief granted on imports was constrained by the quality of available data.
“Tax expenditure estimated based on the Nigerian tax reference system amounted to N1.95tn including N1.419tn from waivers of common external tariff levy, which constitutes 72.6 per cent of all customs tax expenditures. Import VAT tax expenditures amounted to N111bn. Of the N1.419tn from waivers of common external tariff levy, import duties exemption certificate amounted to N1.417tn.”
The report further revealed that petroleum products (fuels and lubricants) accounted for 46 per cent of the N216.88bn import duty waiver granted. In 2021, China accounted for nearly half of the total relief granted, with Singapore, Netherlands, Togo, Benin, and India among the other top countries benefiting from these reliefs.