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Tariffs Threaten Gas Industry: Economic Impact of Importation

Tariffs
Tariffs Threaten Gas Industry: Economic Impact of Importation

In a recent news conference held in Ilorin, Mr. Taiwo Odediran, the Chief Executive Officer of ‘Gas Nigeria Initiative’ (GIN), has called for the prompt removal of tariffs on the importation of containers of compressed gas into Nigeria.

Touchaheart Nigeria reports that Odediran expressed concerns that the existing tariffs, which amount to 67.5 percent, are hindering the growth of the Gas Economy Aspiration of President Bola Tinubu’s administration.

The Impact of High Tariffs

Odediran emphasized that the newly revised Import Adjustment Tax (IAT) of 40 percent for containers of Compressed and/or Liquefied Gas has brought the total tariff payable for this item to an exorbitant 67.5 percent.

This high tariff, according to him, poses a significant challenge to the nation’s gas economy aspirations.

“It is a mild statement to state that the tariff is bogus and excessive and thus calls for a prompt review,” Odediran stated.

He further highlighted the importance of gas containers or storage tanks in any gas utility infrastructure, stressing that these are crucial components of a Gas-Based Economy.

However, the high tariffs on these storage tanks are threatening the administration’s drive towards achieving this goal.

The Burden of Tariffs

Currently, the total tariffs on gas containers/storage under the Customs and Excise Tariffs (CET) stand at 67.5 percent. These consist of 20 percent Import Duty (ID), 7.5 percent Value Added Tax (VAT), and a staggering 49 percent Import Adjustment Tax (IAT).

Odediran noted that it is surprising for stakeholders in the gas industry to discover that Gas Storage Tanks, vital to Tinubu’s Gas Economy Aspiration, carry the highest taxes in the nation’s Customs and Excise Tariffs.

He argued that such excessive taxes no longer contribute positively to the economic sector.

The Role of Tariffs

Odediran explained that tariffs have three primary functions: as a source of revenue for governments, a means to protect domestic industries, and a tool to remedy trade distortions.

He cited Japan as an example of a nation that generates revenue from tariffs but emphasized that the importance of revenue from tariffs has diminished with the introduction of systematic domestic taxation.

The Way Forward

The CEO of ‘Gas Nigeria Initiative’ urged the Nigerian government to consider the economic implications of high tariffs on gas containers.

He proposed that if these tariffs are either completely removed or reduced, the nation could earn more income from domestic gas consumption under a Gas-Based Economy than from import tariffs on gas utility facilities and tools.

Odediran also highlighted the lack of significant domestic investment in manufacturing pressure vessels for gas containment or storage in Nigeria, given the absence of rolled steel sheet production.

He called for a more realistic tariff structure to encourage investments in gas infrastructure.

What You Should Know

Odediran expressed his belief that the high tariffs on the importation of Gas Storage Tanks may be the result of an error or economic sabotage, as they discourage continued investments in gas infrastructure.

He emphasized the need for more accessible gas containment and storage solutions to realize the vision of a thriving gas economy in Nigeria.

The appeal from ‘Gas Nigeria Initiative’ echoes the urgent need to review and potentially remove the excessive tariffs on compressed gas containers to promote economic growth and enhance the nation’s gas industry.

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