Customs Modernisation: A Driver of Economic Growth, By Abdulsalam Mahmud

Customs Modernisation: A Driver of Economic Growth, By Abdulsalam Mahmud

Amid dwindling revenue stemming from the country’s poor economic growth, the Federal Government (FG) launched a presidential initiative two years ago: The Nigeria Customs Service Modernisation Project.

The Modernisation Project seeks to significantly optimise and diversify government revenue away from the oil industry. Among other things, the project creates the basis for improving Nigeria Customs Service (NCS) services (such as improved revenue generation, facilitating trade development, and minimizing corruption) and placing its operations on the path of long-term sustainability.

Expected to have a significant long-term impact on the social and economic development of the country, the project is being implemented under a Public-Private Partnership (PPP) arrangement. Its terms are set out in a Concession Agreement (CA) executed on 30th May 2022 between FG (represented by the Nigeria Customs Service Board) as Grantor, and Trade Modernisation Project (TMP) Limited, as Concessionaire.

In April last year, the Federal Executive Council (FEC) ratified the anticipatory approval of former President Muhammadu Buhari, leading to the execution of the Concession Agreement. The project has numerous benefits, chief among which is the equipping of the NCS with state-of-the-art technology infrastructure and facilities to transform the service into an organization that provides efficient services to businesses and other government agencies.

Furthermore, the Concessionaire will also provide operational support to the NCS, including maintenance services and training of its personnel, in addition to the deployment of Information and Communications Technology (ICT) infrastructure (equipment and software). This support extends from the commencement date until the end of the 20-year concession period.

Key Project Benefits

The key benefits of the project are as follows:

1. Enhancing the revenue generation of the Federal Government through optimisation of NCS Business Processes and automation to increase efficiency, vigilance, and technology-based solutions to revenue leakages.

2. Facilitating and hastening the urgently needed optimisation of NCS’s ICT Systems and supporting infrastructures towards trade facilitation.

3. Development of systems and networks aimed at preventing and suppressing smuggling, and collaboration in sharing information with all regulatory government agencies and partner security departments and units.

4. Introduction of Unified Customs Management System (UCMS), e-Port, Logistics Monitoring, electronic-Cargo Tracking, and Mobile Enforcement Systems for efficient, predictable, and transparent imports and exports and transit trade business processes and procedures.

5. Increased automated operations, compliance monitoring, and minimization of human interface to reduce incidents of bribery, corruption, inefficiency and create an organized automated structure for the NCS.

6. Capacity building for NCS personnel through training, supervised routines, and collaborative work.

The Project’s Benefits to Nigeria

1. The major advantage of the project is the significant growth in the revenue profile of the Federal Government. The project will generate in excess of $250 billion for the Federal Government over the life of the concession.

2. The project will bring Nigeria at par with the rest of the world in the deployment of technology to facilitate international trade.

3. The economic diversification activities of the Federal Government will receive a strong boost by providing further ease of cross-border trading.

Customs Modernisation in Other Countries

The Automated System for Customs Data (ASYCUDA) is overseen by the United Nations Conference on Trade and Development (UNCTAD) and has more than 80 countries using it, currently in its third generation of software. The largest implementation of customs modernisation is in the EU, where it has been operational bloc-wide since the 1990s.

This is at the heart of the EU Customs Union and has greatly simplified trade facilitation within the bloc and between the bloc and other countries. There are several studies on its success, and the EU strategy paper on customs modernisation is updated almost yearly.

The fact that Brexit has not led to a breakdown in trade facilitation in Europe is attributable to this phenomenon. The United States has also developed and deployed its customs modernisation platform that allows traders to process clearance and pay for duties anywhere, anytime. This has eliminated the need for third-party agents and empowered shippers to take more control of their activities while supporting ports management efforts to run as efficiently as possible.

The United Arab Emirates has also been implementing a customs modernisation project and is currently on the second version of its software. The status of Dubai as the heart of global trading would have been impossible without automation of its Customs processes. China, the largest trading facilitation system in the world, relies extensively on customs modernisation schemes, including the automation system being implemented by Huawei Technologies across many of its ports.

It is noteworthy that Huawei is the lead technical partner for the Nigeria Customs Service modernisation project.

How Does the Project Help FG’s Revenue Positions?

Automating the customs processes helps to increase revenue collection because improved trading experiences will increase trading frequency and therefore, revenue from chargeable duties. The automation will also help to address revenue leakage challenges in collecting duties through the NCS.

Is Concession the Best Way to Achieve This?

The $3.2 billion investment required to deliver the project is quite enormous. A concession will support the efforts of the government to diversify the economy and increase revenue, while freeing up scarce resources to address other critical areas of economic growth, such as infrastructure.

*Will the Project Lead to Job Losses?*

As with the introduction of any disruptive technology, new jobs will be created through the new service points required for the project to function effectively. The project will create a new set of professionals who will help end users navigate the system. Studies of similar projects around the world have shown that the ripple effects lead to the creation of new jobs across many industries, as well as growth of businesses, which together contribute to wealth generation and sustainable development.

*Last Line*

The Customs Modernisation Project is an initiative whose time is ripe. FG should therefore do everything possible to ensure its fruition, being a potent game changer for Nigeria’s march to economic prosperity.

Mahmud is the Deputy Editor of PRNigeria and wrote in via: [email protected].