Summary

On 1 March 2022, the Honourable Minister of Finance issued a Circular communicating that President Buhari has approved the implementation of the 2022 Fiscal Policy Measures which comprise Supplementary Protection Measures (SPM) for the enforcement of the Economic Community of West Africa States Common External Tariff (ECOWAS CET) 2022 – 2026, and excise duties on goods such as non-alcoholic beverages, alcoholic beverages, cigarettes and tobacco products, and telecommunication services with effect from 1 April 2022.

Details

Fiscal Policy Measures (FPM) are set of tools designed by the Federal Government of Nigeria (FGN) to foster economic growth by expanding investment in the public and private sectors, and diversifying resources from less desirable investments to more desirable ones. The 2022 FPM supersede the 2021 FPM which had been in force since 6 September 2021. The approved SPM (as contained in the 2022 FPM) comprise the following Annexes:

  • Import Adjustment Tax (IAT) list with additional taxes (levy) on 172 tariff lines of the extant ECOWAS CET;
  • Import Prohibition List (Trade), applicable only to certain goods originating from non-ECOWAS Member States; and
  • National list consisting of items with reduced import duty rates to promote and stimulate growth in critical sectors of the economy.

Specifically, the following changes have been introduced by the 2022 FPM:

  • Import duty reduction will be granted on certain goods as will be listed in a new Chapter 99 in the ECOWAS CET to be implemented by Nigeria. However, only verifiable investors/manufacturers who require these items as inputs for production will be able to access the concessionary import duty. This seems to be a strategy by the FGN to stimulate growth in critical sectors of the economy.
  • New excise duty rates have now been implemented on goods such as non-alcoholic beverages, fruit juice, and energy drinks (and all other non-alcoholic beverages) at a specific rate of ₦10 per litre. Similarly, excise duties on alcoholic beverages like beer and stout will be levied at ₦40 per litre, wines at ₦50 per litre, and whisky, brandy, vodka and rums at ₦50 per litre.
  • Furthermore, excise duties on cigarettes and other smoking tobacco will now be levied at a specific rate of ₦4.20k per stick (30% ad valorem rate) and ₦1000 per kilogram or ₦3,000 per litre respectively. This will serve to promote the local sourcing and thus the local production of these items.
  • "All goods imported" will now be removed from the Export Prohibition List of the ECOWAS CET and formerly imported goods on which the import duty was fully paid may now be re-exported at a rate of 2.5% export surcharge of the present value, but only at the approval of the Federal Ministry of Finance, Budget and National Planning.
  • Import tariff and Value Added Tax (VAT) exemptions on some COVID-19 essential medical supplies have also been included in the FPM in line with the World Customs Organization (WCO) recommendation as supported by the World Health Organization (WHO). The exemption of these items is however subject to importers obtaining a letter of support from the Federal Ministry of Health and Import Duty Exemption Certificate from the Ministry of Finance Budget and National Planning. The approved list of exempted medical supplies takes immediate effect and remains effective till 31 December 2022.
  • Based on the Circular issued by the Minister of Finance, the new excise rate will take effect from 1 June 2022. In addition, a grace period of 90 days commencing from the effective date of the Circular (which is 1 April 2022) will be granted to all importers who had opened Form "M" and must have entered into an irrevocable Trade Agreement before the coming into effect of the Circular to process and clear their goods at the duty rates applicable prior to 1 April 2022. However, any new import transaction entered from 1 April 2022, will be subjected to the new import duty regime.

Implications

The 2022 FPM is intended to promote the Federal Government's plan to stimulate growth in the Nigerian economy. Thus, it is important for importers to liaise with their advisors and understand the impact of the new measures on their business and if necessary re-evaluate their businesses models to take advantage of any concessions in the FPM and enjoy any import duty exemptions as well as other benefits in the FPM such as the removal of the imported items from the banned export list amongst other benefits. Importers may also want to understand how to minimise their exposure to increased tariffs or rates Additionally, it is important for importers that have entered an irrevocable Trade Agreement and opened a Form "M" in respect of any pending import to take advantage of the 90-day window to process and clear their outstanding goods at the rate applicable prior to 1 April 2022.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.