LPG importation into Nigeria at zero duty? To import goods and equipment into Nigeria requires the payment of customs duty and VATS. Depending on the HS code, some goods pay import duty of 5%, 10%, 0r 20%. Ordinarily, importers of LPG pay 5% duty for propane base, and 0% duty for butane base. By duty percentage here, we do not necessary mean the percent of goods value. Our article below clarifies how to estimate customs duty and taxes. Feel free to check the article below to have a comprehensive understanding of customs duty in Nigeria. Furthermore, contact us today for hassle free cargo handling.
CALCULATING CUSTOMS DUTY; NIGERIA AS EXAMPLE
However, on a letter (date: 28 November 2023), federal government of Nigeria states the removal of import duty and VAT for LPG imports. The letter by the ministry of finance and copies the special adviser to the president on energy, the comptroller-general of the Nigeria Customs Service (NCS), and the chairman of the Federal Inland Revenue Service (FIRS). What exactly is the content, reason and purpose of the letter with the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun? Let us see in the following paragraphs.
LPG IMPORTATION INTO NIGERIA AT ZERO DUTY?
Recall that in 2019, the federal government previously removed VAT on LPG importation into Nigeria. The then chairperson of FIRS stated that the measure had the target to growing the LPG sector. Unfortunately, the removal was short-lived; as VAT was then reintroduced in 2021. Nevertheless, in the latest removal, the ministry of finance said the exemption aligned with President’s commitment to enhancing Nigeria’s investment climate, and promoting clean cooking practices.
“In line with His Excellency, President Bola Tinubu’s commitment to improving the investment climate in Nigeria, increasing the supply of LPG to meet local demand, reducing market prices and promoting clean cooking practices, I hereby affirm presidential directive dated July 29, 2022, with reference number PRES/88/MPR/99.
“Accordingly, the importation of LPG utilizing HS Codes 2711.12.00.00, 2711.13.00.00 and 2711.19.00.00 is exempt from import duty and Value-Added Tax. Consequently, the Importation of LPG shall incur a 0 per cent duty rate and 0 per cent VAT rate, effective immediately.”
Consequently, the ministry instructed the NCS and FIRS to comply with the directive pending its official gazette. In addition, the ministry of finance directed the NCS to comply with the presidential directive, dated July 29, 2022. Thus, NCS is to withdraw all debit notes issued to imported LPG “using codes 2711.1.2.00.00 and 2711.13.00.00 from August 26, 2019, to the present date. More items exempted from VAT and duty payment are LPG cylinders, LPG cascades, gas leak detectors, steel pipes, steel valves and fittings, LPG dispensers, gas generators, LPG trucks, among others.
WHAT DOES THE PRESIDENTIAL DIRECTIVE ON LPG IMPORTATION INTO NIGERIA MEAN TO LPG IMPORTERS?
The directive for LPG importation into Nigeria at zero duty means relief for importers of LPG and related equipment. In the section below, we shall illustrate how much an importer saves from this directive to allow LPG importation at zero duty and without VAT.
Assume you are to import LPG gas generator from Shanghai China into the Tincan Island port Lagos. Let us say the value of your import is $200,000, and in 20X40 feet containers, using MSC as the shipping company. Follow us below as we work out the amount savable from the directive by federal government of Nigeria.
Parameters and duty:
Value of goods in the transaction currency: $200,000
Number of containers: 20 pieces of 40 feet container
Freight cost: $80,000 (assuming $4,000 per container)
HS code for LPG gas generating set in Nigeria: 8502392000 (5% duty without VAT)
Import duty exchange rate today: 951.941
Value of goods in Naira: NGN190,388,200 ($200,000*951.941)
Freight cost in Naira: NGN76,155,280 ($80,000*951.941)
Cost of marine insurance: NGN249,218.15 (assuming a premium rate of 0.85% for clause C)
Cost insurance and freight – CIF: NGN266,792,698.15
Surface duty – ID: NGN13,339,634.91
7% Surcharge: NGN933,774.44
1% CISS: NGN1,903,882
ETLS: NGN1,333,963.50
VAT: 0.00 (Hs code has no VAT)
Total duty payable, excluding the CISS: NGN15,607,433.00
Consequently, what the federal government is saying is that you should save the sum of Fifteen Million Six Hundred Seven Thousand Four Hundred Thirty Three Naira. This figure represents nearly 9.0% of the values of the goods. What a gift from federal government of Nigeria.
WHAT YOU PAY WHEN YOU IMPORT LPG AND OTHER DUTY EXEMPT PRODUCTS
Duty exempt does not mean zero payment on import. The following are what you pay when you enjoy LPG importation at zero duty:
- Firstly, CISS
- Secondly, terminal charges and storage charges by terminal operators
- Thirdly, shipping company local operation charges and demurrages by the shipping liner
- Equally, SON product certification and SONCAP
- SON inspection charges too
- In addition, NERC importation permit if generating sets
- Marine insurance certificate cost
- Lastly Clearing Agency fee
Look also: NERC IMPORTATION PERMIT: HOW TO PROCESS IT
CONCLUSION
Nigerian government’s removal of duty and VAT from LPG and related equipment is a welcome development. The purpose is to encourage investment in the gas sector and promote gas as alternative cleaner energy. Importers of LPG are happy as the no longer paying duties. Similarly, Custom Brokers are elated, as more investors will bring in more goods. Furthermore, contact us today for smart cargo handling from beginning to the end.