The Lubricant Producers Association of Nigeria and the Nigeria Customs Service resolved an impasse caused when the agency continued to charge a 10 percent base oil import tariff after a regulation change cut it to 5 percent.
The controversy stemmed from a government regulation (Code 2710.1939.00) for base oil, described as Other in an amended tariff line, a loophole Lupan alleged the Nigerian Customs Service had exploited to insist on continuing to charge the previous import duty of 10 percent. The tariff total is based on a companys total volume of imported base oil.
Lupan protested that the customs service failed to comply with the directive of Nigerias coordinating minister for the economy and minister of finance to instead charge only a 5 percent import duty on base oils. In a letter to the customs service, the association cited a regulation amendment that spelled out the reduction. It was thus with shock and disillusion that we received information that most of the customs command in the country are in blatant disregard of the directive from your esteemed office, rather insisting on the payment of the previous tariff at 10 percent and have gone further in a bid to enforce their stance, to seal up the silos/tanks of some operators, pending compliance, said Emeka Obidike, executive secretary of Lupan.
The impasse over the import duty on base oils was resolved after a recent visit by the leadership of Lupan to the comptroller-general of the customs service in Abuja.
The customs service has been inundated with complaints about the clarification of the regulation and tariff rate for base oil, the customs service stated in a letter dated Sept. 10, signed by the deputy controller on behalf of the comptroller-general. I am directed to inform you that base oil falls correctly classifiable under HS Code 2710.1939.90 at 5 percent duty rate and 5 percent value-added tax in tandem with Common External Tariff 2008-2012 as extended.
Obidike said revolving the impasse will strengthen the activities of operators in the Nigerian lubricant sector. It will also bring about reduction in the prices of both base oils and finished lubes and make the importation of finished lubes less attractive, he said.
At the first Nigerian Lubricant Summit in Lagos in August, Lubcon International Chairman Jani Ibrahim urged the Nigerian government to reduce import tariffs on raw materials such as base oils, additives and packaging materials.
Kayode Sote, principal consultant for Nigerian Lubricant Summit organizer Lube Services Associates, said the reduced duty tariff on imported base oil is a good development and represents one of the reasons the summit was organized – to attract attention to challenges in the sector. However, government can do more by increasing the tariff on imported finished lubes to between 15 and 20 percent to encourage local blenders.
Taiye Williams, managing director of Lubcon International, agreed that resolving the impasse to enforce the lower import duty on base oil is a good development for local blenders.
The new tariff rate will definitely change the equation in the Nigerian lubricant sector. When you cut 5 percent off what we were expending on base oils, it will make a whole lot of impact on the sector, Williams said. This is also kudos to Lupan and shows that with a united front, we can achieve much.