In 2020, the federal government approved the $3.2bn concession deal for the automation project of the Nigeria Customs Service (NCS). But, the NCS just signed a 20-year concession agreement with a consortium, Trade Modernisation Project Limited.
The Africa Finance Corporation (AFC) is the lead financier, while Huawei Technologies Co. Limited is the technical service provider on this Public-Private Partnership (PPP) project, under the supervision of Nigeria’s PPP regulatory body, the Infrastructure Concession Regulatory Commission (ICRC).
This project aims to modernise customs processes in Nigeria and solve the age-long challenges of smuggling, tax evasion, and easy remittances. Despite the aforesaid good intentions of the customs modernisation project, federal government ministries, departments, and agencies (MDAs) lack transparency and accountability, which can mar the opportunities inherent in this concession agreement.
What are the opportunities?
As a member of the World Customs Organization (WCO), Nigeria’s $3.2 billion e-Customs projects align with the organization’s strategic document for customs to embrace automation in its procedures and chart a course for maximum use of Information technology. Beyond this, there are some opportunities that customs automation presents for trade and economic growth.
Improve automation of customs processes
The NCS began its automation with the Automated System for Customs Data (ASYCUDA), then 2.3 and 2.7, and moved to ASYCUDA 3.0 and ASYCUDA World in no time. In 2013, ASYCUDA was upgraded to the Nigeria Customs Information System (NICIS). The NCS uses the NICIS 2 to process customs payments and other trade-related activities.
Over twenty agencies are connected to the NICIS 2 system, including the Nigeria Ports Authority (NPA), the Central Bank of Nigeria (CBN), Economic and Financial Crimes Commission (EFCC), Federal Inland Revenue Service (FIRS), Revenue Mobilization Allocation and Fiscal Commission (RMAFC), National Agency for Food and Drug Administration and Control (NAFDAC), National Drug Law Enforcement Agency (NDLEA), and at one time, the Presidency.
Hence, this system needs to improve to change from manual to full automation, so bringing in Huawei as a technical partner further enhances the automation and will lead to better trade facilitation for importers and exporters.
Increase revenue generation
The e-Customs project is an investment of $3.2 billion, broken down into a capital investment of $1.2 billion in three phases during 36 months. The PPP arrangement reduces the project capital burden on the government. Asides from that, the project is expected to generate billions of dollars in revenue.
According to the Comptroller General of Customs, Hameed Ibrahim Ali, about $176 billion in revenue will be generated through the project within the 20 years. He said further that the e-Customs would quadruple Customs’ current N210 billion monthly revenue collection. In place of this, the remittances of the customs to the federal government will increase, which will also spill over to state and local governments.
Reduces delay in cargo inspection and monitoring
Nigeria ranks 110 out of 160 countries on the Logistics Performance Index as of 2018. The West African country scored 1.97 on the efficiency of the customs clearance process, one of the lowest scores.
Delay in cargo inspection has been a significant challenge for the NCS. The e-Customs project will eradicate the multiple alerts generated for released and already examined containers, which cause more delays at the ports. Automation will create an efficient audit system that analyzes and releases cargo without delays.
Also, port congestion caused by these delays is estimated to cost Nigeria $55 million a day in lost economic activities. Still, the e-Customs project using real-time live feeds of port areas will reduce delays by monitoring the movement of cargoes.
Build a single remittance system
Despite the NICIS 2, the NCS can only process import and export duties. Excise duties paid by in-country manufacturing countries are collected using analog means.
There is massive excise duty evasion which the e-Customs project will rectify by building a tech infrastructure that captures in-country factories database and automates excise duties operations. With the modernization project, manufacturing and production will have more coverage in Nigeria’s trade data.
Increase the workforce
Despite concerns that automation will reduce the workforce, the reverse is the case when e-Customs are implemented. At the project’s signing ceremony, Ali was quoted saying: “There are rumours that this project will weed off officers. Let me allay those fears: we are even in need of officers. We have only about 15,000, and by the management’s mission, we need nothing less than 30,000 to carry out the mandate effectively.”
Matters Arising on the e-Customs project
Stakeholders are concerned that the new e-Customs deal is another white elephant project that will sink the country further into the abyss of corruption and increase its debt profile. We discuss other concerns below.
Concerns about automation duplication
Customs is a procedural service, and there are concerns that the e-Customs project handled by Huawei will only duplicate the Web Fontaine-built NICIS portal with no significant changes. The National President of the National Council of Managing Directors of Licensed Customs Agents (NCMDLCA), Lucky Amiwero, shared his reservations on automation duplication and the technical partner chosen for its execution.
It may lead to a rise in inflation
Nigeria is a consumer economy, and the NCS’ projection of expected revenue before the commencement of this project may lead to a rise in inflation. Imports generate more revenue than exports in Nigeria. Hence the NCS’s revenue projection and target-driven approach may lead to an increase in import duties, which will have a ripple effect on the cost of imported goods. This will cause a rise in prices of goods and services, and negatively affect the purchasing power of citizens.
Equipment and infrastructure deficits
The lack of essential equipment such as scanners used in cargo inspection, breakdown of equipment like quay aprons, and inaccessible roads to port areas are new and recurring challenges in Nigerian port operations. Equipment deficit is still a challenge to the e-Customs project. For instance, scanners procured 2-3 years ago were just delivered and have not become operational yet. E-Customs automation process and adoption will be negatively affected if physical infrastructure and equipment are not provided alongside it.
While the country was coming to terms with the signing of the e-Custom deal, a federal high court granted a restraining order stopping the federal government, the NCS, and other project partners from taking further actions. The plaintiffs cited issues of due diligence, breach of agreement, abuse of office, and lack of transparency in the concession deal.
When the issues around the concession are resolved, and the project takes off, the complete automation of customs operations alongside port digitalisation will improve trading activities in the country. Still, the government and MDAs need to infuse transparency and accountability into their open governance practices.
Since Nigeria possesses some of the best agricultural export products in the global market, the complete automation of the customs process will boost the export and lifespan of perishable products. Asides from that, the capturing of the country’s duties and levies, including from the manufacturing sector, will positively affect its nominal GDP.
With Nigeria being home to some of the busiest ports in Africa and the AfCFTA in motion, implementing a customs modernization project will have push-pull effects on its trade and economy.