Lagos, Nigeria – November 21, 2024 – The Nigeria Customs Service (NCS) has achieved an unprecedented revenue growth of 225% over the past five years, reaching a historic N5.0795 trillion in 2024. This marks a significant surpassing of its target of N5.079 trillion, despite a downturn in import volumes—an essential source of revenue for the agency.
The impressive revenue surge has been largely driven by the devaluation of the naira and the high foreign exchange (FX) rates used in clearing goods at Nigerian ports. In 2020, Customs generated N1.56 trillion, but by 2021, the figure had risen to N2.24 trillion, a 44% increase. This growth trajectory continued into 2022 with a 16% rise, reaching N2.6 trillion, followed by a 24% increase in 2023 to N3.21 trillion. By November 2024, NCS had already surpassed its target for the year, posting a 58% increase from 2023 to N5.0795 trillion.
Port Revenues Surge Despite Declining Imports
The NCS’s two major commands, Apapa and Tin-Can Island Port, have been pivotal in achieving this milestone. Apapa Port, which saw N2.1 trillion in revenue between January and November 19, 2024, and Tin-Can Island Port, which collected N1.046 trillion between January and November 7, have both posted record-high earnings. These results come despite a decrease in import volume, with Tin-Can handling about 5,000 containers this year, down from 9,000 containers at the same time last year.
Naira Depreciation and High FX Rates Contribute to Customs Revenue Growth
The depreciation of the naira, which has fallen by over 140% against the dollar since the introduction of the FX reforms in June 2023, has significantly affected manufacturers and importers. The naira fell to N1,687.52/$ by November 11, 2024, from N702.19/$ in June 2023. The high FX rate, now N1,688.284/$ for calculating import duties, has increased the cost of clearing goods, contributing to a 119% rise in the cost of clearance compared to pre-reform levels.
As a result, importers, especially manufacturers of finished goods, are facing severe economic pressures. The high FX rates for cargo clearing have forced businesses to use an unstable exchange rate, making it nearly impossible to plan for restocking inventories or manage operational costs effectively.
Economic Pressures on Businesses
Industry experts have criticized the high import duties and the fluctuating FX rates used by Customs, which have led to soaring commodity prices. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, stressed that the FX rate for calculating import duties needs to be reviewed. He noted that the high rates, close to N1,700/$, have contributed to the rising cost of goods in the market, forcing businesses to bear the brunt of the devaluation.
“People grapple with the FX rate when the goods land because the exchange rate in the open market is used for the computation of import duties,” Yusuf added. “This needs to be corrected to avoid further economic strain.”
Naira Devaluation’s Dual Impact
Despite these challenges, Dera Nnadi, Area Controller of the Tin-Can Island command, confirmed that the devaluation of the naira had played a role in helping Customs achieve its revenue target. However, he acknowledged that the constant devaluation of the currency poses a threat to trade and significantly reduces profit margins for importers.
Jonathan Nicole, immediate past president of the Shippers Association of Lagos State, highlighted that unstable import policies and currency devaluation have made business operations more difficult, leading to a decline in profit from imports. He further pointed out that the high cost of doing business in Nigerian ports has pushed businesses to consider alternative ports in neighboring countries like Cotonou and Togo, leading to potential job losses in Nigeria.
Looking Ahead
The Nigeria Customs Service has demonstrated resilience in its revenue collection, but the economic challenges faced by businesses underscore the need for regulatory reform and more stable economic policies. While Customs’ revenue growth is an impressive feat, it also highlights the mounting pressure on Nigerian manufacturers and importers, who are grappling with high operational costs and the unpredictable FX landscape.
The ongoing devaluation of the naira and fluctuating import duties have raised concerns about the sustainability of these revenue gains. As the country navigates these economic challenges, it remains to be seen how policymakers will address the growing cost pressures on businesses, which are vital to the nation’s economy.