AS THE GOVERNMENT RAISES IMPORT DUTIES ON LUXURY GOODS: ANY ECONOMIC SENSE?

AS THE GOVERNMENT RAISES IMPORT DUTIES ON LUXURY GOODS: ANY ECONOMIC SENSE?

                               By:
              Nurudeen Dauda 
              4th January 2017
nurudeendauda24@yahoo.com
nurudeendauda24@gmail.com 
nurudeendauda.blogspot.com

As a student of "political economy" who aspires to become a "scholar of political economy" am deeply convinced that you can hardly understand "politics" without a sufficient knowledge of the economy. However, for those who understand how the economy works will rightly tell you that, of the two major policies of managing an economy "FISCAL POLICY " appears to work more than the "MONETARY POLICY" in a period of "Recession ". It is important to note that the FISCAL POLICY is managed by the minister of "finance" while MONETARY POLICY is the CBN's mandate.

The Government raises import duties on consumable and luxury goods as announced by the Minister of Finance, Mrs Kemi Adeosun. The policy states that:Sports Utility Vichicles (SUVs), boats, sports cars now attract 70%  from the previous 20%; Rice(from 10% to 60%), Sugarcane(from 10% to 70%), salt( from 10% to 70%); alcoholic spirit, beverages and tobacco from 20% to 60%; and also included on the list are packaged cement, from 10% to 50%; cotton/ fabrics materials, from 35% to 45%; and used cars popularly known as Tokunbo, from 10% to 35% respectively.However, essential industrial sector accessories, including bolt, industrial oil and other equipment are to enjoy a downward review to 5% in order to spur local industrialisation.

For luxury goods,in my understanding it will make a lot  of "sense ".The consumers of those luxuries are likely to "reduce" or stop completely from the consumption of those goods defending on the nature of "elasticity" of its demand.  If the consumers stop from its consumption it will reduce "pressure" on our "foreign reserves "and also encourage "savings" in the banks which is equal to "investment".However, In the event,the consumers do not "stop" the consumption of luxury goods due to their "habits" it will give the government more "revenue ".

For Rice, sugarcane,Salt,Cotton,Palm oil,Wheat, Tobacco,and Cement which they can all be sourced locally. The believers of "Liberal theory" of International economic relations will tell you to allow your local industries without protection.However, the believers of theory of "economic Nationalism" will argue that you need to support your local industries to grow. The new policy will support local farmers to grow products for local alternatives. This policy if followed strictly will boost the local economy and create a lot of jobs for our youth.

For the used cars it will definitely increase its prices which consumers might not be happy with but nonetheless, it will likely lead to the development of local Automobiles ;such as: Innoson Motor Manufacturing Plant Nnewi,Anambra state,Peogot Automobile, Kaduna state etc.However,essential industrial sector accessories, including bolt, industrial oil and other equipment are to enjoy a downward review of 5% duties to spur local industrialisation.

However, the cut in the import tariff on items for industrial use may encourage entrepreneurs whose industries are shut down due to the high duties paid on imported components. Such companies may resume or expand their operations as a result of the incentives.
However, while the new policy may trigger a rise in the prices of some consumable goods until the demand for them is met locally, the Nigerian Customs Service, which has been grappling with meeting the fiscal target set for it by the Federal Government may boost its revenue.

The President has approved the fiscal policy measures made up of the Supplementary Protection Measures (SPM) for implementation together with the ECOWAS CET 2015 – 2019 with effect from 17th October, 2016. It is important to note that the approved SPM was in line with the provision of the ECOWAS CET comprising the following:“An Import Adjustment Tax (IAT) list with additional taxes on 173 tariff lines of the extant ECOWAS CET; national list consisting of items with reduced import duty rates to promote and encourage development in critical sectors of the economy; an import prohibition list (Trade), applicable only to certain goods originating from non-ECOWAS member state.

May God bless Nigeria!

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