Price Hike And Rising Inflation Due to New Import Levy

Nigerians may soon feel a tighter squeeze on their wallets as manufacturers brace for a wave of increased production costs, following the reintroduction of a controversial government policy. The Manufacturers Association of Nigeria (MAN) has raised a red flag over the Federal Government’s decision to enforce a four percent Free-on-Board (FOB) charge on imports, warning that the additional cost will ultimately be passed on to consumers and worsen the country’s already high inflation rate.

This new policy officially came into effect on August 4, 2025. In a public statement issued by the association’s Director General, Segun Ajayi-Kadir, MAN did not hold back in its criticism. The group described the measure as a setback for local manufacturers, many of whom are already navigating one of the most challenging economic environments Nigeria has seen in years.

Ajayi-Kadir explained that the FOB charge will significantly raise the cost of importing raw materials, especially those that are not produced locally. With manufacturers spending over N6.6 trillion on raw material imports in 2024 alone, the financial implications of the new policy are massive. These costs, the association says, will not simply be absorbed by manufacturers. Instead, they will trickle down to consumers in the form of higher product prices.

The reality is, Nigerian manufacturers are already operating under intense pressure. Inflation is currently at 21.88 percent as of July 2025, a rate that is squeezing both businesses and households. Now, with the new levy in place, prices are expected to rise even further, deepening the economic strain on everyday Nigerians.

According to MAN, the government’s policy change could not have come at a worse time. Beyond inflation, manufacturers are struggling with exchange rates that have surged beyond 1,540 naira to the dollar. Many companies also face overwhelming energy expenses, often relying on alternative power sources that cost the sector more than 1.1 trillion naira annually. On top of this, interest rates now average above 35 percent, making it increasingly difficult for businesses to secure the financing needed for expansion or even day-to-day operations.

In addition to rising domestic costs, the association raised concerns about how this policy could affect Nigeria’s competitiveness across the West African region. Neighboring countries like Ghana, Côte d’Ivoire and Senegal, which also collect inspection or import fees, typically charge between 0.5 to 1 percent on FOB value. Higher levies, when imposed, are usually limited to luxury goods. Nigeria’s blanket four percent charge stands out as steep by comparison and could drive importers to redirect cargo to other West African ports where charges are lower and the business environment is more predictable.

MAN warned that this situation might lead to unintended consequences. With businesses looking for more cost-effective ways to operate, there is a real risk that cargo will be diverted to neighboring countries. This could encourage informal cross-border trade, including smuggling and under-declaration of imported goods, practices that harm both legal businesses and government revenue.

Another major concern raised by the association is the functionality of Nigeria’s import processing systems. The Nigeria Customs Service (NCS) recently introduced a new cargo processing platform known as B’Odogwu, but it has reportedly been plagued by technical glitches. According to MAN, these problems have delayed cargo clearance, increased demurrage charges and in some cases led to factory shutdowns due to stock shortages. These setbacks add more pressure to manufacturers already trying to cope with a turbulent economy.

More troubling, MAN noted that the 4 percent FOB charge was implemented without adequate consultation with industry stakeholders. The association said manufacturers were not properly informed about the timing or the reasoning behind the new levy. This lack of engagement has created uncertainty and distrust, which can hinder efforts to stabilize the manufacturing sector.

As a possible solution, MAN has called on the Federal Government and the Nigeria Customs Service to suspend the levy until the end of 2025. The association is urging the authorities to take the time to conduct a full impact assessment, consult with stakeholders and explore alternative ways to meet revenue goals without stifling local industry.

Until such a review is completed, MAN recommended maintaining the current system, which includes a one percent Comprehensive Import Supervision Scheme (CISS) fee along with a seven percent cost of collection. According to the group, this structure strikes a better balance between government revenue generation and the competitiveness of Nigerian manufacturing.

In strong language, the association criticized the new levy as being anti-industry. It argued that at a time when the manufacturing sector is already shrinking, introducing new costs contradicts the government’s stated commitment to industrialization and economic diversification.

This policy shift is part of a broader restructuring of Nigeria’s import tax regime. Recently, the Comptroller-General of Customs, Adewale Adeniyi, announced that the country would consolidate multiple import-related charges into a single four percent FOB fee. The goal, according to Adeniyi, is to simplify the import process and eliminate the existing CISS fee and the seven percent collection charge. Under the new system, importers are expected to pay only the four percent levy upfront, with no additional hidden fees.

While the intention may be to streamline importation and reduce bureaucracy, manufacturers argue that the policy was rushed and poorly communicated. They believe that the government needs to find a more measured approach—one that supports local production, encourages economic growth and protects the pockets of everyday Nigerians.

For now, all eyes are on how the government will respond to the mounting pressure from the manufacturing sector. Whether it sticks with the new policy or reconsiders its approach could have lasting consequences for the Nigerian economy, especially at a time when every decision counts.