FG’s Zero Import Duty Policy Stalls Amid Rising Inflation

The Nigerian government’s zero import duty policy on essential food staples is encountering significant obstacles, dampening hopes for reduced food prices among low-income citizens. Analysts point to confusion among implementing agencies, inflationary pressures, and unfavorable exchange rates as key factors undermining the policy’s objectives.

Despite intentions to ease food inflation, Nigeria’s inflation rate has soared since President Bola Tinubu took office in May 2023, rising from 22.4% to 33.95% in May 2024. The inflation rate peaked at 34.19% in June before slightly declining in July and August but rising again to 32.7% in September, according to the National Bureau of Statistics.

In response to these escalating inflation rates, President Tinubu announced a 150-day duty-free import window for food commodities aimed at mitigating the financial burden on Nigerians. However, the initiative has faced delays, with reports indicating that the Nigeria Customs Service (NCS) will forgo N188.4 billion in revenue, causing concern among the Ministry of Finance and the Federal Inland Revenue Service.

The NCS announced on August 15, 2024, that the policy was set to commence following an implementation letter from the Finance Ministry dated August 8, 2024. However, two and a half months later, progress has stalled due to bureaucratic hurdles and disagreements among government agencies involved in the rollout.

Stakeholders have expressed frustration over the lack of coordination and unclear directives. Lucky Amiwero, President of the National Council of Managing Directors of Licensed Customs Agents, highlighted the confusion surrounding the implementation, stating that communication from the government has been inadequate. “We cannot waste money writing to a government that came up with a policy they cannot implement,” he remarked.

The implications of these delays are severe, with many companies struggling to cope with rising energy costs and exchange rate fluctuations, leading to potential closures and reduced capital flow.

Analysts at Afrinvest Research have criticized the policy, suggesting that its protectionist approach may not yield optimal results due to existing agronomic and infrastructural challenges in Nigeria. They recommend extending the suspension period for more meaningful impacts while stressing the need to address gaps in the domestic agriculture value chain.

Furthermore, Afrinvest noted that inflation and exchange rate challenges have already overshadowed the intended price moderation for targeted food items. The food inflation rate rose by 25 basis points year-on-year to 37.8%, reflecting the negative effects of increased energy prices and transportation costs, along with natural disasters affecting agricultural production.