Ports operators decry e-invoicing, lament costs escalate

By ADEBAYO OBAJEMU

The new port policy guiding import procedure has sparked outrage and denunciation from operators and stakeholders, who have seen their business dealt a mortal blow as the cost of doing business escalates.

Many importers caught unprepared by the policy have simply abandoned their cargoes at the ports, due to inability to raise the required duty to clear them.

For decades, there has been uneasy relationship between the Nigerian Customs Service and licensed Customs’ agents bordering on procedures and costs for clearing of cargoes at the various entry and exit points – sea ports, airports and land borders. Many of the thorny issues that have created difficulties for agents and other stakeholders in the maritime value chain have remained largely unresolved.

In the midst of this, the Central Bank of Nigeria entered the mix with a policy tagged: ‘e-invoicing’, early in the year. This new policy has proved to be the last straw that broke the proverbial carmel’s back, as all stakeholders in the maritime sector rose in unison to condemn the policy, saying it is bad for their businesses.

Indeed, they fright forwarders had embarked on a three week strike when the policy was first introduced in February to protest against insisting on lack of consultations before it was initiated, which led to its suspension till June. However, with its coming into force, costs have tripled leaving both importers and agents in a quandary.

Licensed agents and freight forwarders as well as other stakeholders claim that the Central Bank innovation-policy upon implementation will hinder cargo clearance and trade facilitation. And in chats with Business Hallmark, many of them have decried its adverse effects on their businesses and profit margins.

Genesis of the controversial e-invoicing
On January 21, 2022, the Central Bank, the country’s apex bank unveiled a new set of guidelines for its newly introduced electronic invoicing (e-invoicing) and evaluator for exporters and importers. According to CBN, the implementation would take immediate effect from February 1, 2022. The aim obviously, was to address the worsening revenue crisis facing government.

This was contained in a circular signed by the Director, Trade and Exchange Department. According to the said circular, the new regulation was put in place to among other things, determine the accurate value for goods leaving the country or otherwise.

The apex bank also emphasized that the electronic process would replace the hard copy and the invoice authenticated by the authorised dealer banks. The circular reads in part:

“Effective February 1, 2022, all import and export operations will require the submission of an electronic invoice authenticated by the authorised dealer banks on the Nigeria single-window portal – Trade Monitoring System.

“This new regulation is primarily aimed at achieving accurate value from import and export items in and out of Nigeria. No importer/exporter may effect payment to the credit of any foreign supplier unless the electronic invoice has been authenticated by authorised dealer banks presented together with the relevant document for payments,” the circular said.

“CBN also stated that a yearly subscription fee of $350 shall be “charged per authentication of suppliers on the system.”

Giving assurances that the new e-invoicing template would be based on a global price verification mechanism, which is determined by benchmark price – a spot market price obtainable in the market where the goods are traded during the invoicing, the bank said the policy was in the interest of the economy.

The circular listed the obligations of both exporters and importers in the new scheme as well as possible sanctions for violating the rules.

Immediately the policy was unfurled, it was attacked by the entire maritime host, including agents, freight forwarders, and even the Manufacturers Association of Nigeria (MAN) and the Nigeria Association of Cars Dealers.

In the heat of the condemnation in March this year, Lucky Amiwero, the National President of the National Council of Managing Director of Licensed Customs Agents (NCMDLCA) petitioned President Muhammadu Buhari, arguing that the CBN guidelines goes against the law of Customs and Excise Management (Amendment) Act (CEMA) 20 of 2003 on valuation of goods and Customs and Excise Management Act C 45 of 2004 for the procedure of import regulation and export.

According to him, the power to enact guidelines on import and export is statutorily resident with the Minister of Finance as prescribed in Section 36 and 57 of the Customs and Excise Management Act C 45 of 2004. He emphasised that there is no such thing as benchmark or global pricing verification in the world.

“The application of benchmark to importation or exportation contravenes the Customs and Excise Management (Amendment) Act 20 of 2003 operated under the General Agreement on Tariffs and Trade (GATT) valuation agreement Articles VII of world trade organization (WTO).

“Benchmark is not acceptable. Its treatment is under the Brussel Definition of Value (BDV) which is outlawed globally and Nigeria based on global application of GATT valuation Agreement domesticated under Customs and Excise Management (Amendment) Act 20 of 2003, is the legal and proper application for the valuation of goods.

“As member of Central Bank committee on Destination inspection in 1999, Presidential Committee on Destination Inspection in 2006, Member Presidential Task Force for the Reform of Nigeria Customs Service, member Committee on Import Clearance Procedures and implementation of Fiscal policy Measures 2013, we request that the law should be obeyed by withdrawing the circular, which is not in line with import and export procedures in Nigeria,” he maintained.

If the implementation of the CBN guideline was allowed, according to him, it would engender duplication, lengthy and cumbersome procedures in the nation’s import and export system, especially for those who are not experts on valuation, import and export procedures.

In a chat with Business Hallmark, Joe Ebilakun, maritime trade expert, formerly with Conair Cargo ltd, a clearing and forwarding firm said “the apex bank’s e-invoicing was totally uncalled for as the Single Windows platform is enough to monitor transaction of trade from the shipping industry. For instance, a car ( a Nissan Murano SUV 2007) that would have cost N640,000 two months ago now requires N1.7 million, almost thrice the former rate.

“I can tell you that the implementation of the policy is already creating problem, compounding cargo clearance from the ports. Now the money for clearing three cars before Emefiele’s e-invoicing is now the one used to clear just one car. CBN was just looking for ways to reduce pressure on Naira.

“Besides, implementation came when the apex bank did not do any consultations with stakeholders before rolling out the policy. Ever since it came on board, I have seen many agents that have been driven out of business because of excessive fees and cumbersome process entailed in the e-invoicing.”

He warned that if the policy is not discontinued goods might be diverted to neighbouring ports in the sub region. He also lashed out at the CBN Governor, Mr. Godwin Emefiele, for coming up with ill-advised policy, noting that the directive from the apex bank cannot sustain on the long run “otherwise it would drive many out of business.”

Johnson Osiyemi, a licensed Customs agent said that the e-invoicing was a bad policy, wondering why CBN came up with such difficult policy, saying that the sector revenue generating agencies remit to the Treasury Single Account (TSA), adding that the decision from the Ministry of Finance supercedes what the CBN Governor is clamouring for. Osiyemi said the policy has virtually driven him out of business.

“Apart from being expensive, as I speak to you I have five cars out there waiting for clearances. But where is the money? I had to pay almost four times the amount I used to pay in order to clear a vehicle just two weeks ago.

“I knew how much it cost me to clear Lexus 350 two weeks ago. I can’t continue like this. CBN wanted to drive us out of business. This policy is eroding my profit margins.”

The Manufacturers Association of Nigeria, MAN, has also kicked against the policy as not being in the interest of its members. The CBN has from the start harped on the fact that the new regulations primarily was structured at achieving accurate value from import and export items in and out of Nigeria.

It, however, exempted individual invoices with a value of less than $10,000 as long as the suppliers do not have “annual cumulative invoicing value of equal to or above $500,000 or its equivalent in another currency.

In its exemption list is “import and export made by all security agencies in the country, supplies to diplomatic and consular missions to international agencies dependent on the United Nations; goods directly supplied by a foreign government and donations made by foreign governments or international organisations to foundations, charities and recognized humanitarian organisations.”

But the the Manufacturers Association of Nigeria, MAN, did not buy in into the cheers coming from the CBN. In its consistent reaction to e-invoicing, MAN has opposed the policy as not good for their business, saying the new regulation and its guidelines might, “run roughshod on private enterprises.” It bemoaned lack of consultation before the policy was unveiled.

The Director-General of MAN, Mr. Segun Ajayi-Kadir, has consistently called on the CBN to rest the policy guidelines for now and in order to give room for more consultations and dialogue with stakeholders to address the concerns.

MAN expressed deep concern over the new regulation’s declaration that any Form M or NXP that bears a unit price over 2.5 per cent of the verified global checkmate price would not be approved. It said that this would checkmate the opportunity of its members to derive higher value for their exports.

It warned that the body was worried about the determination of global price verification mechanism and benchmark prices, adding that “what would happen if some companies could negotiate better prices due to their scale of order and can get competitive lower prices? Will these competitive prices be within the benchmark? This aspect of the policy will lead to several challenges on valuation down the line including a floodgate of valuation issues with Nigeria Customs Service,” MAN alleged.

Part of MAN’s grouse is that the policy has been affecting their businesses, in addition to the fact that members, also, are apprehensive that transmitting the authenticated invoices through the CBN-appointed service provider to the Nigeria Single Window portal could introduce unnecessary bureaucracy with attendant multiple charges.

The body expressed concern that already it is contending with this type of anomaly and could not afford any addition. It views it as a further disincentive to local and foreign investors.

The manufacturers association also objected to paragraph D of the guidelines, which directed that the content of the electronic invoice authenticated by authorised dealer banks is only advisory for the Nigeria Customs Service (NCS).

This implied that the NCS could vary it, probably uplift the FOB when issuing the PAAR, and subject manufacturers to paying unnecessary additional FOB upliftment by the NCS. It pointed out that the CBN might force such importer or manufacturer to reduce its price if it considered it not in conformity with the benchmark pricing.

The MAN also warned that the annual subscription fee charge of $350 per authentication by suppliers on the portal meant to maintain the system has the potential to trigger a run on Nigeria business by their foreign partners and encourage these suppliers to look elsewhere in the region as well as the continent.

The initiative, it is believed, will increase the cost of importation into the country with its contributory effect to the economic hardship in the land and the worsening inflation weakening the citizens purchasing power.

Bode Asaju, a car dealer at Fagba, said since his foray into car dealership 20 years ago, he had never experienced this kind of threat to his business as the e-invoicing.

“Look at my fleet, they are not more than 8 cars now. Last year January, I had more than 18 cars in my fleet. My partner overseas is anxious and highly disturbed at the turn of events in Nigeria as regards this e-invoicing.

“He wants to send some cars, but I don’t know what to do. Where will I get money to clear them, what of the cumbersome process of the e-invoicing. CBN for the sake of justice should review this policy.”

For both car dealers and buyers, it is a no win situation. Already, the foreign exchange has really shut up prices of goods, including cars. This has now been compounded by the e-invoicing which has further affected the end users as dealers have tended to defray the huge cost of clearing their wares by taxing buyers.

Molade Aderayo, who was haggling over the price of a Toyota Camry known in local parlance as “Big Daddy”, told Business Hallmark at car dealer point in Agidingbi, Ikeja that the Camry, “is now N2.5m, but about two years ago, one could get it at N1.2m. Where are we going in this country.”

At the heat of the e-invoicing brouhaha in March, the House of Representatives’ Joint Committee on Customs and Excise, Banking and Currency gave the Ministry of Finance, Budget, and National Planning; Central Bank of Nigeria; and the Nigeria Customs Service, including other relevant stakeholders two weeks to reconcile their differences over the electronic valuation and invoicing policy recently introduced in the import and export chain.

Recall that at the investigative hearing held by the committee in Abuja sometime in March this year, the CBN, NCS and the Manufacturers Association of Nigeria differed on the policy, forcing the lawmakers to ask them to meet and harmonise their differences within two weeks.

The Nigerian Customs Service was initially opposed to it, but has since supported the policy after series of meetings with the CBN .
The e-invoicing and the controversy it has caused and its ripple effects on import/export value chain may just be about entering a second phase as the Central Bank has not shown any intention of reversing itself. And for those crying wolf, it is not yet Uhuru.