Nigeria: Approval for the implementation of the 2023 Fiscal Policy Measures and tariff amendments

On 20 April 2023, the Honorable Minister of Finance, Budget and National Planning, confirmed the approval of the 2023 Fiscal Policy Measures (FPM) by President Muhammadu Buhari of Nigeria.

The approved 2023 Fiscal Policy Measures (FPM) includes the Supplementary Protection Measures (SPM) for the implementation of the ECOWAS Common External Tariff (CET) 2022 – 2026, revised excise duty on alcoholic beverages, cigarettes and tobacco products, introduction of excise duty on Single Use Plastics (SUPs) amongst others.

This article discusses some key provisions of the 2023 Fiscal Policy Measures (FPM).

1. Supplementary Protection Measures (SPM): this relates to the implementation of the ECOWAS Common External Tariff which became effective from 1 May 2023 subject to 90-days grace period for importers who had opened Form M before this date. Items on the list include rice, woven fabrics, ceramics tiles and sinks, steel, containers for compressed or liquified gas, aluminium cans, washing machines, electric generating sets and rotary converters, smart phones, new and used passenger motor vehicles and electricity meters.

The applicable duties for most of the items are unchanged from the 2022 Fiscal Policy Measures (FPM) rates.

Consequently, any new import transaction entered from 1 May 2023 shall be subject to the following new import duty regime:

(a) Import Adjustment Tax (IAT): The Import Adjustment Tax list has been amended to include an IAT levy on 189 tariff lines, including a 2% levy on motor vehicles of 2,000 cc to 3,999 cc, and 4% levy on motor vehicles with cylinder capacity of 4,000 cc and above.

However, motor vehicles below 2,000 cc, mass transit buses, electric vehicles, and locally manufactured vehicles are exempt from the IAT levy.

(b) Import prohibition list: The Supplementary Protection Measures also updated the Import Prohibition List (Trade) for 2023 to include dichlorofluoromethane. The prohibition will only apply on items originating from non ECOWAS member states.

(c) Reduced import duty rate: The National list (“the List”) was also revised to reduce the import duty rates on some selected items. The Circular clarifies that the reduced rates for the selected items on the List is necessary to promote and stimulate growth in critical sectors of the economy. However, the reduced rates can be accessed by only verifiable investors and/or manufacturers who require the items as inputs for their production.

2. Revised Excise Duty Rates – there was revised excise duty rate on alcoholic beverages and tobacco products, based on the current excise regime implementation, effective from 1 June 2023. These are further increases over and above the 2022 FPM’s approved Roadmap for 2022-2024 in the form of new and higher advalorem excise duties and specific rates.

However, the excise duty rates on telecommunication services at 5% and non-alcoholic carbonated, and sweetened beverages at N10 per litre will remain as introduced by the Finance Acts 2020 and 2021, respectively.

3. Green Tax: introduction of a Green Tax by way of excise duty on Single Use Plastics (SUPs) including plastic containers, films and bags at the rate of 10%. Also, an Import Adjustment Tax (IAT) levy has been introduced on motor vehicles of 2000 cc to 3999 cc at 2% while 4000 cc and above will be taxed at 4%. Vehicles below 2000 cc, mass transit buses, electric vehicles, and locally manufactured vehicles are exempted. The new rules take effect from 1 June 2023. This is part of Nigeria’s commitment to climate change adaptation and mitigation to environmental degradation.

4. Telecommunication Tax: the 2023 Fiscal Policy Measures (FPM) also confirms the excise duty on telecommunication services earlier introduced via the Finance Act 2020 and prescribed in the Official Gazette No. 88, Vol. 109 of 11 May 2022 approved by the President. The tax is applicable on mobile telephone services (GSM), fixed telephone and internet services, both post-paid and prepaid at the rate of 5%.

In conclusion, it can be said that the government is imposing new taxes on goods and services that were previously untaxed or had lower tax rates. This means that Nigerians will have to pay more in taxes, which could affect their disposable income and overall standard of living.

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Reference/ Citation

https://customs.gov.ng/?cat=9

https://www.icirnigeria.org/buhari-gifts-nigerians-taxincrease-as-tenure-elapses