Proposed Tax Waivers for Nigerian Maritime Industry: SOCIAL ACTION advocates for Infrastructural Development in the Sector
The Federal Ministry of Transportation has proposed a series of tax incentives for the Maritime industry. This was disclosed by the Director – General of the Nigerian Maritime Administration and Safety Agency (NIMASA), Dr. Bashir Jamoh, who stated that the proposed tax incentives were meant to boost economic activities in the Sector, amid the economic downturn caused by the coronavirus pandemic. According to him, the tax incentives which shall be applicable to vessels imported by Nigerians or by the Nigerian shipping companies and intended for use in foreign or domestic trade, shall include: zero import duty (full waiver) for brand new vessels, 0.5 percent import duty (partial waiver) for vessels aged between one and five years, and 1 percent import duty (partial waiver) for vessels aged between five and eight years, respectively.
It is worthy of note that the Nigerian Maritime sector has been a key driver of international trade and economic growth, while also contributing to improving non-oil revenue for the government, through custom and excise duties. In cognisance of the economic meltdown brought upon by the COVID-19 outbreak, tax waivers given for a short period of time, could be deemed necessary to promote economic recovery in the sector. However, the Nigerian government ought to focus more efforts on increasing investments in the sector that will contribute to real expansion and growth, which will directly benefit the nation.
In the first quarter of 2020, Nigeria experienced significant growth in non-oil income, majorly from custom and excise duties. But in the second and third quarters, there were economic setbacks induced by the pandemic, which have affected the implementation of the 2020 budget. With the country currently facing challenges in the financing of the 2020 budget, tax waivers given to importers in any sector must not be made to extend over a long period of time, as resources are direly needed by the government to provide basic amenities and infrastructure for the populace. We recall that Dangote Cement Company of Nigeria was awarded a similar tax holiday worth over ₦10.4 Billion for cement production for five years and Nigerians never benefitted from such generous support given to the private sector business, as the cost of cement remained on the high side.
With the economic situation still in the negative, policies of the government must be geared towards alleviating the suffering of the masses, rather than enriching a few business operators. Alone (SOCIAL ACTION) strongly urges the Nigerian government to improve investment in the Maritime sector for effective performance, such as, an increased and sustained investment in critical port infrastructure. Port facilities should be upgraded for quick discharge of consignments. All facilities that support and enhance the Maritime transport sector, making it efficient, productive, safe and environment-friendly, should be revamped, to enable the sector achieve its fundamental objectives. Nigerian ports are relatively small for modern vessels to load or discharge liquefied products and bulk cargoes, and Nigerian waterways are not deep enough for the navigation of ultra-modern vessels. There is an urgent need to dredge the shallow waterways and also create more dry ports, in order to decongest the already overstretched sea ports.
In addition, we call on the government to address the lingering issue of congestion at the Lagos sea port. Maritime activities should not be concentrated in one area when there are multiple sea ports along Nigeria’s coastline that can aid economic diversification and inclusion. It has been reported that Lagos port charges are lower and the route has better security, unlike the other ports. Hence, most shipping companies insist on transporting goods through the Lagos port only. The government should address the concerns of both the shipping companies and importers, as part of efforts to decongest the Lagos port and create a conducive business environment. Cargo shipping business should be decentralised along the 853km length of Nigeria’s coastline.
These extant challenges in the Maritime sector have reduced Nigeria’s level of involvement in international trade and limited the ability of the sector to contribute significantly to the nation’s Gross Domestic Product (GDP). Nigeria’s economy would benefit enormously from the expansion of its navigable coastal areas for effective maritime competitiveness and significant trade participation involving larger future vessels. Such inland waterways expansion will be a much better incentive than tax waivers, as it will encourage more foreign direct investment (FDI) and private sector involvement in the maritime transport business, thereby boosting port services and engendering the much-needed development in the industry.
For further enquiries, kindly contact the Communications Team Lead, SOCIAL ACTION on: lillian[at]saction.org