President Bola Tinubu on Wednesday approved the implementation of a zero percent import duty and exemption of value-added tax (VAT) on several essential food items, in a move to tackle Nigeria’s skyrocketing food inflation.
The directive, which came into effect on July 15, 2024, is set to run until December 31, 2024, and is aimed at alleviating the high cost of basic commodities like maize, millet, rice, and wheat in the Nigerian market.
While the policy was generally welcomed as a positive step towards addressing the nation’s food crisis, the Nigeria Customs Service (NCS) has issued stringent guidelines to importers intending to import food items into the country, according to a circular it released on Wednesday. The guidelines have sparked backlash from economists and industry experts, who argue that the measures may hinder the effectiveness of the initiative.
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The core objective of President Tinubu’s policy is to reduce the price of staple foods that have become increasingly expensive due to inflationary pressures, supply chain disruptions, and a declining local agricultural output. A circular from the presidency noted that this measure is intended to “ameliorate the high cost of food items in the Nigerian market” and would be limited to “the national supply gap” as determined by a committee set up by the Minister of Agriculture.
According to the policy, the items eligible for the zero percent duty and VAT exemption include maize, millet, rice, wheat, beans, husked brown rice, grain sorghum, and others that previously faced import duties ranging from 5% to 30%. The move is expected to bolster supply by allowing food imports without the financial burden of duties, in turn making these essential items more affordable for Nigerians.
The importation of these items, however, will be limited to investors with milling capacity and verifiable backward integration programs, ensuring that only companies with significant local production or processing operations benefit from the duty waivers. This was meant to prevent indiscriminate importation and protect the local agricultural sector from being completely overshadowed by foreign competition.
NCS Guidelines: A Bureaucratic Hurdle?
According to the circular signed by Abdullahi Maiwada, National Public Relations Officer for the NCS, only companies incorporated in Nigeria, operational for at least five years, and fully compliant with annual returns, taxes, and statutory payroll obligations over the past five years, are eligible to participate.
Further requirements stipulate that companies importing maize, wheat, or beans must either be agricultural firms with enough farmland for cultivation or feed mills/agro-processing companies with an established out-grower network. Importers of husked brown rice, grain sorghum, or millet must own a milling plant with a capacity of at least 100 tons per day, operational for at least four years.
Additionally, the policy mandates that at least 75% of imported items be sold through recognized commodity exchanges, with all transactions recorded and reported to the NCS. Importers must keep detailed records of all related activities, and failure to meet these obligations will result in the loss of waivers, with companies required to pay VAT, levies, and import duties retroactively.
“The Federal Ministry of Finance will periodically provide the NCS with a list of importers and their approved quotas to facilitate the importation of these basic food items within the framework of this policy.
“The policy requires that at least 75 percent of imported items be sold through recognized commodities exchanges, with all transactions and storage recorded. Companies must keep comprehensive records of all related activities, which the government can request for compliance verification.
“If a company fails to meet its obligations under the import authorization, it will lose all waivers and must pay the applicable VAT, levies, and import duties. This penalty also applies if the company exports the imported items in their original or processed form outside Nigeria.”
Bashir Adewale Adeniyi, Comptroller General of the Nigeria Customs Service, reaffirmed the NCS’s commitment to supporting the government’s initiative, stating that the zero-duty policy is part of broader efforts to ensure food security and stabilize the economy.
“This measure aims to mitigate the high cost of food items in the Nigerian market by making essential commodities more affordable for citizens,” Adeniyi said. He explained that the guidelines are designed to maintain transparency and accountability while ensuring that companies benefiting from the waivers are genuinely contributing to the local agricultural sector.
“Nigeria Not Serious About Dropping Food Prices”
These measures, while intended to ensure transparency and proper usage of the duty-free waivers, have drawn sharp criticism from economists and analysts who argue that the guidelines are too restrictive, and bureaucratic, and could impede the goal of reducing food prices.
One of the most vocal critics of the NCS guidelines is Kalu Aja, a respected economist who has expressed frustration over what he sees as unnecessary bureaucratic red tape that could undermine the urgency of the food import initiative.
“I read through the requirements for duty-free imports, and I say this administration is not serious about dropping food prices with the speed it deserves,” Aja said.
His concern centers around the complexities of the application process, which he believes will slow down the importation of essential food items and delay any relief for Nigerians facing high food costs.
Aja, who had advocated temporary food import to tackle Nigeria’s hunger crisis, noted that food inflation is a national emergency requiring swift, decisive action.
“Food inflation is a national crisis; it is an emergency, yet these guys are creating a massive bureaucracy over this,” he noted, implying that the requirements may disincentivize potential importers due to the lengthy processes involved in meeting eligibility criteria.
For Aja, a simpler, more direct approach would yield faster results: “What is difficult is saying: 1. Import 2. Customs charges duty 3. Customs applies duty credit of 100%.” He argued that such a streamlined process would provide immediate relief to consumers without the complexities introduced by the NCS guidelines.
“This is a very short-term window to drop food inflation. With all these requirements, why would anyone be incentivized?” Aja asked, voicing skepticism over the effectiveness of the policy if businesses are deterred by the burdensome regulations.
“The Customs is too bureaucratic and does not understand business. What is the Coordinating Minister of the Economy doing?” Aja asked, suggesting that the policy needs more direct oversight from economic authorities to cut through the red tape and ensure quick implementation.
Nigeria is currently grappling with 41% food inflation, which has squeezed the spending power of its populace to the barest minimum. Nigerians are said to spend 64% of their earnings on food, against the five to six percent recommended by the United Nations
While the government is optimistic about the potential impact of the zero-duty policy, there is growing concern that NCS’s stringent guidelines may slow down the process of bringing affordable food into the country.