The debate surrounding the 4 % Free on Board (FOB) charge to be collected by the Nigeria Customs Service has exposed the delicate balance between government revenue generation and the broader need for trade facilitation and economic stability.
Intended as a mechanism to strengthen sustainable funding for Customs operations, the levy has generated significant concern among importers, manufacturers, freight forwarders, and economists. Their worry, rooted in fears of higher costs and inflationary pressures, led to a swift intervention by the Federal Ministry of Finance, which suspended the charge pending wider consultation. This step, though temporary, is necessary and timely, but it also highlights important lessons about policy implementation in a fragile economic environment.
The authority for the FOB charge did not emerge arbitrarily. It stems from the new Nigeria Customs Service Act, often described as the successor to the old Customs and Excise Management Act (CEMA). Under the new Act, several modern mandates and funding frameworks were introduced, intended to strengthen transparency, automation, trade facilitation, and predictable revenue. As a matter of fact, Section 18(1)(a) of the NCSA 2023 is the basis for the 4 % FOB provision.)
Because of this, Section 18(1)(a) of the NCSA 2023 is frequently invoked, since it mandates that the Customs Service shall maintain a fund that is financed, among other sources, by “not less than 4 % of the free-on-board value of imports” (i.e. a floor of 4 %) to support the service’s operations.
Thus, the authority for the 4 % FOB charge is not a whim of Customs alone — it flows from legislation passed by the National Assembly and assented to by the President. What remains open to debate is how this provision should be implemented, and whether it’s economic and practical effects were sufficiently anticipated.
The law provides that Customs should receive not less than 4 % of the FOB value of imports as part of its funding structure. This replaced older arrangements where Customs collected a 7 % cost-of-collection surcharge on behalf of agencies like NPA and NIMASA, alongside other levies such as the 1 % Comprehensive Import Supervision Scheme. The intent of the new law was to streamline multiple charges into a single mechanism and provide Customs with a more predictable funding base for modernization, infrastructure, and operations.
This funding was specifically designed to address challenges and funding gaps experienced under a previous arrangement, which included the 1% Comprehensive Import Supervision Scheme (CISS).
Contextually, the introduction of the charge followed the expiration of a contract agreement with third-party service providers like Webb Fontaine, which had been previously funded by the 1% CISS.
Customs therefore acted within the authority granted to it by legislation, and its argument has been that such funding is essential to sustain its core duties.
These duties are threefold. Customs must generate revenue as one of Nigeria’s critical non-oil revenue earners. It must facilitate trade, ensuring that importers and exporters can transact without undue delay or prohibitive cost. And it must secure the borders by combating smuggling, enforcing prohibitions, and protecting national revenue. The tension between these mandates is not new. Revenue collection often leads to more charges, but trade facilitation requires reducing barriers, and excessive levy risk undermining economic competitiveness. This is precisely where the 4 % FOB has become contentious.
Once implementation began, businesses quickly voiced alarm. They warned that the levy would increase the landed cost of goods, further drive inflation, and make Nigeria less attractive for trade. Manufacturers who rely on imported raw materials argued that their production costs would rise, threatening jobs and competitiveness. Freight forwarders and airline operators also flagged its burdensome effect, particularly in sectors already strained by foreign exchange challenges and rising fuel costs. Beyond the financial impact, many stakeholders criticized the lack of prior consultation, arguing that Customs had the statutory right but failed to communicate and prepare the ground for such a sweeping change.
It is in this context that the Finance Ministry’s suspension of the FOB charge was both pragmatic and necessary. The government rightly recognised that even lawful charges must be economically sustainable and socially acceptable. Customs itself has admitted that it should have engaged stakeholders earlier and has since taken steps in that direction by meeting with the Manufacturers Association of Nigeria. This is a welcome start, but not really enough. Consultations must extend beyond manufacturers to importers, freight forwarders, consumer groups, and operators in the big trading markets of Alaba, Kano, Apapa, Ibadan, Aba, Nnewi, and others. Town hall engagements in these commercial hubs would help Customs explain its position, hear genuine concerns, and rebuild trust.
There is no denying that Customs requires funds to operate effectively. Its modernization drive, personnel costs, anti-smuggling operations, and digital systems all need steady and adequate financing. The law provides for a charge of not less than 4 % of FOB value, which is the minimum Customs opted to implement. But the spirit of the law also allows for flexibility in how this authority is exercised. The suspension is therefore an opportunity to reassess timing, phasing, and scope rather than an outright rejection of the levy.
Ultimately, the Nigeria Customs Service does not make policy; it only implements the laws and directives given to it. The legislature provided the framework, and the executive directed its application. What matters is how this power is exercised in a way that does not undermine national economic interest. The suspension of the FOB collection reflects sensitivity to the public outcry, but it must now be followed by transparent consultations, impact analysis, and perhaps a phased approach that balances Customs’ funding needs with Nigeria’s urgent requirement for trade competitiveness and price stability.
This controversy should not be seen as a failure, but as an opportunity to refine the process and build confidence. If Customs embraces wider consultation, demonstrates more flexibility, and recommits to fairness, the eventual implementation of its revenue framework can be more acceptable and sustainable.
No doubt, Nigeria needs a Customs Service that is well-funded, efficient, and modern, but also one that does not price trade and investment out of the market. The Ministry of Finance has taken the right step in suspending the FOB levy, and it is now the responsibility of Customs and all stakeholders to ensure that the next steps strike a balance between legitimate revenue collection and the overall public good.
In summary, let the suspension be a pause, not the end. Let a renewed, inclusive, transparent process yield a compromise that strengthens capacity without stifling trade. Only then can Customs truly reconcile its mandate to generate revenue with its obligation to facilitate commerce and safeguard national prosperity.
