The Nigerian Senate has informed the Nigeria Customs Service (NCS) of a need for a potential upward revision of the agency’s revenue target for 2024.
This move comes amidst growing concerns about the country’s escalating debt and its impact on the cost of living.
In a recent meeting with the House of Representatives Committee on Customs and Excise, Comptroller General Adewale Adeniyi revealed that the NCS generated a total of N3.21 trillion in revenue in 2023, falling short of its targeted sum of N3.67 trillion. This shortfall was attributed to various factors, indicating challenges in meeting ambitious revenue goals.
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Chairman of the Senate Committee on Customs, Isah Jibrin, emphasized the need for the NCS to contribute significantly to reducing Nigeria’s debt burden through increased revenue generation. He stated, “Customs is one of the major providers of internally generated revenue, and as it is today, we expect them to play one of the major roles in this drive to reduce our debt burden.”
Jibrin highlighted the importance of customs concessions in sectors such as agriculture and solid minerals to stimulate economic growth. However, he also acknowledged concerns about the high level of unemployment in Nigeria, noting that while the NCS could create some jobs, it cannot address the broader issue of widespread unemployment.
One proposal under consideration is granting waivers to owners of smuggled vehicles to regularize their Customs duties payment. This move aims to provide a window for individuals to comply with regulations, albeit with certain conditions attached.
However, experts and economists are questioning the wisdom of transforming customs into a revenue-generating agency, arguing that such a strategy could have detrimental effects on the economy.
Critics argue that prioritizing customs revenue generation over trade facilitation could have negative consequences for the economy. Economic experts caution that higher customs duties on imported goods could lead to decreased demand, ultimately resulting in lower overall revenue collection for the agency.
Dr. Ifeanyi Okonkwo, an economist, expressed concern over the Senate’s emphasis on revenue generation, stating, “The duty of customs is to facilitate trade, not to generate revenue.” He warned that higher customs duties would inflate prices of imported goods, reducing consumer purchasing power and stifling economic growth.
Furthermore, Okonkwo criticized the lack of foresight among policymakers, describing their approach as “mentally lazy.” He urged the government to focus on policies that promote trade and investment rather than relying solely on customs revenue to address fiscal challenges.
They noted that the impact of higher tariffs on imported goods extends beyond consumer purchasing power. Increased tariffs can also disrupt supply chains and hinder domestic production, particularly in industries reliant on imported raw materials or machinery. Small and medium-sized enterprises (SMEs) may bear the brunt of higher tariffs, as they often lack the resources to absorb increased costs or seek alternative suppliers.
Additionally, higher tariffs can dampen foreign investment by raising the cost of doing business in Nigeria. Foreign companies may reconsider investment plans or seek opportunities in countries with more favorable trade policies, resulting in reduced capital inflows and economic growth.
Addressing the volatility of the naira exchange rate, Adeniyi highlighted the need for coordination between monetary and fiscal authorities to stabilize the currency. He proposed establishing a spot rate for customs duties payment to provide certainty for importers and facilitate better planning.
Stakeholders have emphasized the importance of adopting policies that support long-term economic growth and development. While generating revenue is essential, experts caution against prioritizing short-term gains at the expense of broader economic stability and prosperity.
The debate involves calls to balance fiscal objectives with trade facilitation and economic growth, which requires careful consideration and collaboration between policymakers, industry stakeholders, and experts. Economic experts warned that failure to strike the right balance could have far-reaching implications for Nigeria’s economic prospects and the well-being of its citizens.