Nigeria imports duty payable by importers have remind stable for some years. The reason is because the central bank of Nigeria has maintained a stable local-currency-to-foreign-currency rate for importation. Exchange rate between the Nigerian legal tender and the dollar was left at N306 to one dollar. This kind gesture has greatly benefited importers of commodities into Nigeria. The duty payable for Nigeria imports depends to a large extent on what the exchange rate is.
Take for example, an importer who has just imported commodities worth $4000, and assuming a freight cost of $500. The formula for total cost, insurance and freight is; [(cost of commodities + freight cost)*exchange rate + Insurance cost]. Therefore, if the marine insurance cost is N10, 000, total cost and freight in this case is (4000+500)*306+10,000 = N1, 387,000. Customs duty rate will now be applied on the total Cost, Insurance and Freight (CIF). What if the exchange rate were N326 to the dollar, what would be the new CIF? The new CIF for the same commodity would be N1, 477,000. The next section will show the impact of varying imports exchange rates.
NIGERIA IMPORTS: HOW IMPORTERS WILL PAY MORE DUTY
Looking at the case considered in the first section, if the exchange rate is 306, CIF is N1, 387,000. If the rate changes to N326, the CIF climbs to N1, 477,000. Let us now see the overall impact of changes in exchange rates on Nigeria imports. We will consider each CIF in turn. Assuming the commodity in question is sanitary wipes with HS CODE (tariff code) 4818100000, duty rate 20% and 5% VAT. The following are the breakdown for both CIF values:
Read Also: CALCULATING CUSTOMS DUTY; NIGERIA AS EXAMPLE
CUSTOMS DUTY FOR FOB – N1, 224,000, CIF – N1, 387,000:
The duty payables are as follows:
- Surface duty (ID) = N277,400 (20%*CIF)
- Surcharge = N19,418 (7% ID)
- CISS = N12,240 (1% FOB)
- ETLS = N6,935 (0.5% CIF)
- VAT = N85,149
- TOTAL DUTY PAYABLE = N401,142.00
CUSTOMS DUTY FOR FOB – N1, 304,000, CIF – N1, 477,000:
- Surface duty (ID) = N295,400 (20%*CIF)
- Surcharge = N20,678 (7% ID)
- CISS = N13,040 (1% FOB)
- ETLS = N7,385 (0.5% CIF)
- VAT = N90,675
- TOTAL DUTY PAYABLE= N427,178.00
The sad news is; the Nigeria Customs Service has issued a directive with immediate effect, increasing import duty rate from N306 to N326 per dollar. This directive is in line with a new foreign exchange policy by the Central Bank of Nigeria (CBN). Most painful aspect of the directive, which is already in force, is that many stakeholders like Clearing Agents say they weren’t carried along.
Read Also: IMPORT DUTY NIGERIA: NEW LEVY
Nigeria imports duty has increased across HS Codes because Customs have changed duty or import exchange rate from 306 to 326 per dollar. Consequently, all regular importers must now ‘button their belts’ and get accept this sudden but almost expected change. Nevertheless, there are other ways to reduce overall expenses for Nigeria imports. We at Vagmon Integrated Services will continue to do our best to assist importers to cut-down overall expenses. Call or chat with us today – +2349075526276. Lastly, we say many thanks for care taking your time to read through this article.