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POLICY INCONSISTENCY ON IMPORTED GOODS

By NBF News
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Minister of Finance, Mr. Olusegun Aganga's recent statement that importation of goods that have local substitutes remain banned, ordinarily, should be a cause for great cheer for Nigerian manufacturers.

It is an interjection capable of re-building the confidence of indigenous manufacturers who are constantly buffeted by unfair competition from indiscriminately dumped foreign products, and constant government policy reversals.

The problem, however, arises from the people's poor perception of government's sincerity on this ban. Only in November 2010, the Federal Government lifted the ban on the importation of items such as toothpicks, furniture and textiles.

It, at that time, said the decision was a result of 'extensive consultation with key stakeholders', and after it found that 'import bans are ineffective and often result in huge revenue losses to government through significant trade diversion to neighbouring countries and the routine smuggling of banned goods into the country.'

That explanation unequivocally exposed government's half-hearted commitment to stopping the dumping of foreign products in Nigeria, and generated uproar in the manufacturing sector. The latest attempt by the finance minister to modify the government's position, apparently, is a reaction to the public criticism of the November 2010 position.

Local manufacturers, many of them beneficiaries of government's N200 billion textile intervention fund, had complained bitterly that they might be unable to repay the credit facility in the face of unfair competition which the November order could trigger. This is a genuine complaint. Government has, over the years, put local manufacturers in harm's way through policy flip flops, which allow all manner of goods to be imported into the country. This has, for years now, rendered locally produced goods unattractive, and significantly reduced capacity utilization in local industries.

It is true that attempts to ban some of these imports result in significant trade diversion and huge loss of revenue. For instance, a recent report by the World Bank on the high level of illegal imports into Nigeria, estimated that goods worth over N750 billion ($5 billion) were smuggled into the country through the border with Benin Republic. The report also claimed that over N6 billion collectible by the Nigeria Customs Services (NCS) is lost annually through such cross-country smuggling. This suggests failure of tariff enforcement.

Undoubtedly too, official complicity contributes to the problem. This would have been minimized had government been consistent and sincere with its economic policies, especially those that require cross-sectoral cooperation to revive our ailing industries and give serious-minded manufacturers and entrepreneurs incentives to deliver on their core competencies.

The inconsistency and opacity surrounding import regime in the country are inexpedient. For example, on November 22, 2006, the Federal Government reviewed the import policy on 30 items. This saw a substantial reduction of tariffs on a number of goods such as polypropylene products, including Ghana Must Go bags, stockfish, test kits for HIV/AIDs, and fibre cement used in roofing and ceilings. Between 2006 and 2010, the bans on a number of these items have been lifted on more than two occasions.

This inconsistency is not healthy for the economy. Nigeria, as a member of World Trade Organisation (WTO) and other international organisations, has multi-lateral treaties which permit her to ban imported raw materials such as textiles and furniture, while admitting essential consumer goods. However, over the years, Nigeria has become a dumping ground for cheaper goods, including items that can easily be produced locally.

This situation is plainly detrimental to the development of the economy. Urgent measures are required to redress the trend. Dumping of foreign products that are also produced locally is killing local industries, especially small and medium scale ones. We advise the government to be consistent and resolute in protecting the best interests of the country in its policy formulation and implementation.