Few months after the take-off of the Economic Community of West African States’ (ECOWAS’) Common External Tariff (CET), some aspects of the common regional tax regime, which seek to tackle the challenges of cross-border smuggling, have been criticised by manufacturers. They say the new policy, which took effect on April 11, should be fine-tuned, writes Assistant Editor OKWY IROEGBU-CHIKEZIE.
Before the commencement of the operational phase of the Economic Community of West African States (ECOWAS) Common External Tariff (CET) on April 11, this year, the policy had enjoyed the overwhelming support of the real sector operators, especially manufacturers. Most of them saw the policy, which ushered in a common regional tax regime, as the wedge for cross-border smuggling, which has almost crippled the domestic economy.
Aside the hope that it would ensure significant improvement in the implementation of the ECOWAS Trade Liberation Scheme (ETLS), which will give rise to the concept of a regional Customs union, the scheme was seen as an effective instrument for harmonising the import policies of member-states to strengthen the framework for the realisation of a common market.
ECOWAS CET allows goods from any other part of West Africa into Nigeria without the imposition of any tax, import duty or levy. It means that goods imported into a Francophone country will not necessarily be cheaper or more expensive than those entering another Anglophone country, such as Nigeria or Ghana.
CET, according to experts, is a mild form of economic union, but may lead to further types of economic integration.
In addition to having the same customs duties, the countries may have other common trade policies such as having the same quotas, preferences or other non-tariff trade regulations apply to all goods entering the area, regardless of which country within the area they are entering.
The approval for the implementation of the new tariff was conveyed in a statement signed by former Finance minister Mrs Ngozi Okonjo-Iweala. The NCS said all imports arriving in the country beginning from April 11, shall be subjected to the rates contained in the CET 2015- 2019 and 2015 Fiscal Measures without recourse to the rates applicable before the coming into effect of the ECOWAS CET 2015 – 2019.
In a statement, NCS spokesman, Deputy Controller of Customs, Mr. Wale Adeniyi, said the approved Supplementary Protection Measures/Fiscal Policy Measures comprised an Import Adjustment Tax list, which involves additional taxes on 177 tariff lines of the ECOWAS CET.
The ECOWAS CET also covers a list of goods whose import duty rates have been reviewed to encourage more development in strategic sectors of the economy and an Import Prohibition List (Trade), applicable only to certain goods originating from non-ECOWAS countries. However, few months into its implementation, certain aspects of the policy appear to have got under the skin of manufacturers.
For instance, at a briefing on the state of the economy, which held in Lagos last week, President, Manufacturers Association of Nigeria (MAN), Dr. Frank Jacobs, said though manufacturers welcomed the introduction and commencement of the operational phase of the ECOWAS CET by the Federal Government, the policy appears to be the bane of industrial development in the country because of the difficulty in the consignment clearing process involved in its implementation.
He said though the CET implementation started with the hope that it would eliminate smuggling, which has almost crippled the economy, the initial stage of its implementation was almost marred with difficulty in clearing processes and unnecessary delay of goods at the ports. This, he said, resulted in high demurrage. He, however, expressed hope that as the Nigerian Customs Service (NCS) gets accustomed to the proficient of the CET procedures, the delay in clearing will be greatly reduce.
But the delay in clearing goods at the ports is not the only grouse of manufacturers.
The MAN chief pointed out that another off-shoot of the implementation of the ECOWAS CET is its implication on pharmaceutical companies in Nigeria. While identifying what he called ‘oversight of the CET’ with regards to the pharmaceutical sector, he said: “It was observed that within the CET framework, imported finished pharmaceutical products attract zero per cent duty, while imported pharmaceutical input materials attract between five per cent and 20 per cent duty.”
The implication of this tariff arrangement, Dr. Jacobs pointed out, is that locally produced medicines will be more expensive than imported ones. “If this is not addressed, it could lead to the closure of pharmaceutical industries and retrenchment of workers. This, by extension, will lead to an upsurge in poverty and crime levels in the country,” he stressed.
Some of the issues raised by MAN are not new. Before the take off of the policy, some experts had argued that there was the need to make smooth the grey areas in its implementation if Nigeria must benefit from CET. For instance, former director-general of Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Dr John Isemede, identified the need for harmonisation of the various tariffs.
For instance, while countries, such as Nigeria, Ghana, and Gambia are Anglophone nations, Togo, Benin, Burkina Faso, are Francophone. Similarly, while Value Added Tax (VAT) is five per cent in Nigeria, 20 per cent in the francophone countries and 15 per cent in Ghana, he noted that only when these VAT are harmonised can there be sub-region talk about one external tariff.
Noting that Nigeria may not get to the Promised Land on the platform of CET unless VATs are harmonised, he called on ECOWAS to harmonise the various VATs in the countries for the smooth implementation of the policy. He also said cost of doing business in Nigeria was high compared to other countries, which is why goods shipped into the country are cheaper than the ones made in the country. He added that there was need to address issues responsible for the high cost of doing business in Nigeria.
Also, Director-General, Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, said CET would have serious implications for the economy, particularly the manufacturing sector, unless issues of high energy cost, high costs of funds, high regulatory charges, and high ports charges, among others, are not addressed. He said the manufacturing sector is suffering significant competitiveness issues hence the need for immediate policy responses to avoid the collapse of what is left of the sector.
Director-General, NACCIMA, Mr. Emmanuel Cobham, said local industries need protection against the influx of foreign products in the wake of the implementation of the ECOWAS CET.
NACCIMA’s position on the policy is that manufacturing companies need some level of protection against the influx of foreign products that the tariff favours. Cobham said since the CET regime had commenced, the government might need to consider ways of alleviating the hardship on importers and manufacturers alike.
Under the new policy, goods are grouped into five categories of tariff rates: zero, five, 10, 20 and 50 per cent. Goods dutiable under the zero per cent category are special drugs as well as industrial machinery and equipment.
Under the five per cent category, goods dutiable include raw materials and other capital goods. Those dutiable under the 10 per cent category are intermediate goods while finished goods attract 20 per cent import tariff. Finished goods that can be manufactured locally, however, attract 35 per cent import tariff.
For MAN, the import adjustment tax of 20 per cent should be introduced for imported finished pharmaceutical products with HS Code 3003 and 3004 because Nigerian manufacturers have the capacity to produce these medicines. Besides, the import prohibition list prescribed in the CET, MAN, insisted, should be retained because there is available local capacity in Nigeria.
“The tariff issues of pharmaceutical products import in respect of the CET tariff arrangement is a crucial matter that must be addressed so as to continue to maintain the employment position in the sector,’’ MAN stressed.
