News

Federal Government Postpones Zero-Duty Tax on Imported Food

Published by Tope Fakinlede on October 19th, 2024.

Federal Government Postpones Zero-Duty Tax on Imported Food

The Federal Government’s initiative to lower food prices by introducing a zero percent duty and exempting selected essential food items from value-added tax faces significant hurdles.

This difficulty is highlighted by a concerning rise in the average cost of imported food, which reached an index of 878.3 in September 2024, driven by broader economic challenges.

On July 8, 2024, the government announced a 150-day window for duty-free food imports aimed at alleviating food inflation in Nigeria. This initiative targeted items such as maize, brown rice, wheat, and cowpeas.

The government stated that this program was designed to mitigate the impact of various factors leading to food shortages and rising prices in the nation. The intention was to eliminate or substantially lower import duties and value-added tax to stimulate food imports and reduce consumer costs.

However, the program has not yet launched, three months after its announcement. Delays have been attributed to bureaucratic processes and the Federal Ministry of Finance’s failure to release a list of eligible importers as required by earlier Customs guidelines issued in August.

During a recent press conference, Finance Minister Wale Edun announced that the government has initiated imports of maize and wheat to stabilize the food market.

Attempts to reach Abdullahi Maiwada, the National Public Relations Officer of the Nigerian Customs Service, for confirmation on the status of these imports were unsuccessful.

As the government delays implementation, prices for imported food continue to rise. The National Bureau of Statistics reported that the price index for imported food items increased by 30.6 points, or 3.61%, from 847.7 in August to 878.3 in September.

Further examination revealed that from the 806.0 index in July—when the policy was introduced—the average price surged by 72.3 points or 8.97% by September.

The upward trend persisted, with imported food inflation hitting 32.89% in March, marking a 3.08% increase from February, and further climbing to 34.01% in April, a rise of 1.12%. May saw inflation reach 34.83%, an increase of 0.82% from the previous month.

The index figures were recorded as follows: 806.0 in June, 826.2 in July, 847.7 in August, and 878.3 in September.

In a related development, the Central Bank of Nigeria allocated $547.7 million (N823.19 billion at the official exchange rate of N1,503.3/$1 as of June 30, 2024) for food imports in Q2 2024. This marks a decrease of $142.48 million or 20.6% from the $689.88 million allocated in Q1 and a decline of N80.76 billion or 8.93% when converted to naira.

Over the past six months, the CBN has disbursed a total of N1.73 trillion. Spending on food imports was recorded as $164.43 million in January, $303.91 million in February, and $221.54 million in March, with allocations of $153.27 million in April, $197.21 million in May, and $197.22 million in June.