VZCZCXRO8496
RR RUEHMA RUEHPA
DE RUEHOS #0238/01 0880745
ZNR UUUUU ZZH
R 290745Z MAR 07
FM AMCONSUL LAGOS
TO RUEHC/SECSTATE WASHDC 8707
INFO RUEHUJA/AMEMBASSY ABUJA 8534
RUEHWR/AMEMBASSY WARSAW 0249
RUEHCD/AMCONSUL CIUDAD JUAREZ 0229
RUEHZK/ECOWAS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 LAGOS 000238 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT FOR AF/W (SILSKI) AND AF/EPS (POTASH) 
DEPARTMENT PASS TO USTR (AGAMA) 
ACCRA PLEASE PASS TO WEST AFRICA TRADE HUB 
DOE FOR CAROLYN GAY 
 
E.O. 12958: N/A 
TAGS: ETRD EFIN ECON NI
SUBJECT: NIGERIA EFFECTS TARIFF CHANGES 
 
REF:   A. 05 ABUJA 1133 
 
 ¶B. ABUJA 122 
 
LAGOS 00000238  001.2 OF 002 
 
 
¶1. Summary: Changes to the Government of Nigeria (GON)'s tariff 
schedule took effect February 28.  The GON extended the Economic 
Community of West African States (ECOWAS) Common External Tariff 
(CET) to many items, reduced tariff rates on most goods, and raised 
rates on others.  Lining fabrics, specialized shoes and certain 
furniture parts were removed from the list of prohibited imports. 
Woven or laminated sacks and bags made from polymers of ethylene and 
other plastics were added to the prohibited list.  End summary. 
 
------------------------------- 
New Tariffs Take Effect March 1 
------------------------------- 
 
¶2. In a November 28, 2006 circular from the Federal Ministry of 
Finance (MF) titled "Addendum to the Review of the Common External 
Tariff (CET)", Nigeria adopted new tariffs.  The Federal Executive 
Council (FEC) allowed a grace period of 90 days, ending on February 
28, 2007 within which importers who had entered into irrevocable 
trade agreements before November 28 could clear their goods.  In 
July 2006, the FEC approved the commencement of the Common External 
Tariff (CET) which took effect in August 2006.  The ECOWAS CET, 
which the Obasanjo administration had originally planned to 
implement by July 2005, has 0, 5, 10 and 20% tariff "bands". 
Nigeria has added its own 50% tariff band. 
 
¶3. Although the CET generally reduced Nigeria's import tariffs, 
duties on some items increased.  Items such as tomato paste in 
retail packs, which previously had a 40% tariff, now carries a 50% 
tariff.  Duties rose on other products, including ceramic tiles from 
35% to 50%, complete R.20 batteries from 40% to 50%, twine and ropes 
not exceeding 52mm from 30% to 50% and wire of non-alloy steel not 
exceeding 0.26mm from 25% to 50% plus a 10% levy on Cost of 
Insurance and Freight (CIF). 
 
¶4. However, the review resulted in significant reductions in duties 
for products like dry powder paints from 45% to 10%, rubber tires 
used on buses and trucks from 45% to 10%, aluminum cans from 35% to 
5%, denatured ethanol from 30% to 5% and adhesives based on polymers 
from 30% to 5%.  Polyester staple fiber and fiber cement used for 
roofing and ceiling were reduced from 25% to 5%.  Pharmaceutical and 
health related products such as test kits for HIV and malaria, 
insecticide treated mosquito nets and insecticide kits had tariffs 
reduced to zero. 
 
----------------------- 
Import Prohibition List 
----------------------- 
 
¶5. The GON removed some items from the import prohibition list. 
Lining fabrics, in rolls of man-made staple filaments or fibers were 
removed from the list, as well as specialized shoes used in 
hospitals, factories and fire fighting.  Made-up fishing nets, 
mosquito nets and other netting fabrics were removed for a one-year 
period from July 2006 to July 2007.  Certain furniture components 
were removed from the prohibition list because they currently are 
not produced in Nigeria.  These include: veneer chair 
skeleton/shell, arm guide, headrest support, back frame and seat 
frame.  Others are injection molded memory, based sled (metal and 
plastic), height adjustment device and control mechanism units. 
These items were removed from the list for 18 months subject to a 5% 
import duty. 
 
¶6. Woven or laminated sacks and bags made of polymers of ethylene 
were added to the list of prohibited items.  These and other sacks 
and bags made of plastics, of the kind used for packaging, are now 
banned due to excess local capacity, according to the November 28 
circular.  (COMMENT:  In 2004, President Obasanjo promised to 
rescind all import bans by January 2007, in line with the conclusion 
of negotiations with other West African countries under the ECOWAS 
CET.  However, the CET negotiations are continuing and unlikely to 
conclude before 2008. (See REF B) END COMMENT.) 
 
-------------- 
Other Measures 
-------------- 
 
¶7. The MF exempted motorcycles and bicycles imported in completely 
knocked down (CKD) forms from Value Added Tax (VAT).  The MF claimed 
this was done to make motorcycles and bicycles more affordable to 
 
LAGOS 00000238  002.2 OF 002 
 
 
the people.  However, the MF declared bicycle rims may be imported 
only by members of the Bicycle Manufacturers' Association of Nigeria 
upon payment of 50% duty, to encourage local bicycle rim production. 
 The concession will continue for one year.  Semi-finished dry cell 
batteries will carry a duty of 20% for the next 18 months as 
compared with finished batteries which carry a 50% duty, to spur 
revival of the Nigerian dry cell batteries industry.  The new policy 
allows pharmaceutical manufacturers to import printed aluminum foils 
at 5% duty, while other importers pay 50%.  The duty on finished 
steel wire rods previously 25% was raised to 50% plus a 10% levy to 
protect domestic steel production and expand domestic production 
capacities. 
 
--------------------------------------------- ------ 
CET Implementation Negatively Impacts Manufacturers 
--------------------------------------------- ------ 
 
¶8. The Manufacturers' Association of Nigeria (MAN) claims the 
adoption of the ECOWAS CET hurts local manufacturers.  According to 
the Director General of MAN, Jide Mike, the disadvantages of the CET 
far outweigh the advantages.  Many members can't compete with 
imports given lower duty rates on certain goods.  Often the effect 
has been to raise duties on some intermediate goods that are 
imported inputs for manufacturers while lowering duties on finished 
goods, imposing on manufacturers a heavier duty burden than under 
the previous fiscal regime with less protection for their final 
products. 
 
¶9. Mike underscored that the country's borders are so porous that 
prohibited and high tariff goods enter at little or no cost.  He 
decried the implementation of the ECOWAS Trade Liberalization Scheme 
(TLS), which has encouraged the influx of goods from West African 
countries where overhead costs are lower than in Nigeria.  He said 
MAN has made several representations to the GON, to explain that 
Nigerian manufacturers cannot compete under the ECOWAS TLS and CET 
programs.  These presentations have been largely ignored, he said. 
 
------- 
Comment 
------- 
 
¶10. Nigeria's previous trade regime provided Qtually the highest 
rate of effective protection in the world.  It was arbitrary, 
unpredictable, and a source for serious corruption.  Overall, the 
partial implementation of the CET has reduced protection levels and 
brought much greater transparency and predictability to a 
significant part of trade regulations.  In the medium-to-long term, 
the ability to make business decisions based on clear, predictable 
tariffs should benefit most companies. 
 
¶11. Nonetheless, a considerable portion of the trade regime remains 
arbitrary, with imports either banned or burdened with tariffs at a 
non-CET 50% rate.  Not surprisingly, the items that have not 
benefited from a tariff change are ones with significant trade 
impact.  In the shorter term, the CET regime will create some 
hardship for Nigerian manufacturers, most of whom had been 
accustomed to significant protection against competing imports. 
Given Nigeria's severe infrastructure problems, local manufacturing 
is seldom competitive without government help in tilting the playing 
field to favor the local manufacturers.  The remaining high tariffs 
and trade bans are meant to provide that tilt. However, the tilt 
also often hampers business as much as helps it, not to mention the 
large-scale smuggling produced by these arbitrary regimes. End 
comment. 
 
BROWNE