Consumers getting raw deal as burden of import duties pushes up prices

Consumers in Nigeria are still paying comparatively high prices for goods relative to their counterparts in developed countries thanks to a far higher tax take from import duties in proportion to the size of its economy, according to a new study by UHY, the international accounting and consultancy network.

UHY studied customs duties levied by 18 economies around the world as a percentage of each economy’s size as a simple indicator of the impact of a country’s trade barriers.

It found that Nigeria charges import taxes equating to 0.96 per cent of its GDP, compared to a global average of 0.47 per cent. By contrast, the major EU economies surveyed raised proportionally the least in customs duties, at just 0.13 per cent of their GDP on average – less than a seventh as much as Nigeria.

Countries which are part of the North American Free Trade Agreement (NAFTA): the US, Canada and Mexico, levy, on average, a sum equivalent to 0.2 per cent of their GDP in customs revenues.

UHY says that protectionist policies implemented by Nigeria to safeguard the interests of their domestic producers risk continuing to adversely impact consumers by creating artificially high prices for imported goods.

It adds that these barriers may also suppress the competitiveness of domestic manufacturers and producers by insulating them from global markets.

Lawrence Etokakpan, Client Relations at UHY Maaji & Co, a member of UHY: “Consumers in Nigeria may still be getting a raw deal, as the government continues to strike a highly protectionist stance in an attempt to boost the domestic agricultural and manufacturing sectors.

“Critics say that high tariffs, quotas, frequent policy changes and unclear interpretations by the Nigerian Customs Services (NCS) all make importing difficult and expensive.

“By creating distortions in the market, the unintended consequence is that consumers are left facing higher prices, while the duties fail to stimulate uncompetitive domestic industries.

“They often simply amount to another tax on businesses and consumers that leaves less money available for spending and investment locally,” UHY stated.

The accounting and consultancy network noted that while the amount levied in duties is one useful measure of the impact of a country’s trade barriers, other factors can also have a bearing.

It said, “For example, some countries may also impose additional taxes, which disproportionately affect imports.

“In China, in addition to higher import duty rates on foreign luxury goods, there is a consumption tax on goods such as alcohol, tobacco, cars and cosmetics; categories in which the most popular brands are often foreign.

“In Brazil, as well as numerous import duties, some of the taxes affecting imports are calculated based on the value of the goods themselves, plus the other taxes levied.

This makes for a very complex system and high costs of import, if not planned well. Conversely, many other economies are creating more Free Trade Agreements (FTAs) or customs unions with a more diverse range of countries in order to increase competitiveness and expand free trade.

“Many are benefitting from spreading their net far wider than purely their immediate geographical neighbours. For example, Mexico has a network of ten FTAs with 45 countries, as well as 30 investment agreements and nine other limited scope agreements.

The US has 14 FTAs with countries including Korea, Singapore and Morocco. Australia has just signed an FTA with China, one of its key trading partners, which should help it to reduce the import duty costs borne by consumers in line with other developed economies.”

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