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FG considers to crash food prices, pharmaceuticals, other products by 18%

THE Federal Government could crash the prices of food items, pharmaceuticals, and other products by an average of 18 per cent if it goes ahead with suspending tariffs on certain consumables, an analysis by The ICIR shows.

On Wednesday, June 5, Bloomberg reported that the federal government of Nigeria was considering a six-month suspension of import duties on staple food items, drugs, and other essential items to curb inflation.

The government is also considering waiving levies on fertilisers, poultry feed, flour, and grains, according to a document sent to Nigerian President Bola Tinubu.

The basic and semi-processed staple foods and other items highlighted in the document included raw materials and other direct inputs used for manufacturing; inputs for agriculture production including fertilisers, seedlings, and chemicals; pharmaceutical products; and poultry feeds, flour, and grains.

The document, ‘Inflation Reduction and Price Stability Order’ will mandate the Ministry of Finance and the Central Bank of Nigeria (CBN) to devise a plan for offering low-interest loans to the agriculture, pharmaceutical, and manufacturing sectors.

“This productive deployment will ultimately improve outputs and reduce inflation,” the document reportedly stated.

It further stated that the government would likely suspend value-added tax (VAT) on automotive gas oil.

Nigeria, largely an import-dependent economy with much of the finished products imported from overseas, imposes different import tariffs amid surging inflation figures and naira devaluation.

The citizens face persistent high inflation which has risen to 33.7 percent in April this year, the highest in almost three decades, and food inflation to 40.5 per cent, the highest since 1996.

The CBN’s monetary policy rate (MPR) tool, which it uses to curb inflation, has surged to 26.25 percent, making it difficult for businesses to borrow funds.

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Worse still, the country’s exchange rate market has remained volatile, peaking at over N1,900 to a dollar earlier this year, disrupting economic activities.

In what seems a desperate move by President Tinubu-led administration to curb rising inflation and tame other economic headwinds, the fiscal authority proposed to suspend import duty and VAT on certain commodities.

The ICIR analysis shows that the prices of the proposed items could drop by an average of 18 percent, a gesture that could relieve Nigerians from the hardship faced in the country.

Findings from the Nigeria Customs Service (NCS) website shows that tariffs on imported goods range from five percent to 35 percent, categorised into five, 10, 20, 30, and 35 percent rates for different items, and a 7.5 percent VAT rate on some of the items.

On the average, the import duty rates and the VAT amounts to 18.44 percent, The ICIR can report.

According to Financial Derivatives Company Limited (FDC) in its commodities price index report released on June 6, the suspension of import levies will lower input costs and improve the cost of living.

The FDC’s statistics put the price of 50 kilograms (kg) of flour and rice at N59,000 and N80,000 respectively. It puts a carton of indomie at N7,800; bread loaf, N1,600; and wheat flour (10kg), N12,700.

If the Nigeria government goes ahead with its proposed  import duty and VAT suspension of certain food items and pharmaceuticals, it then means that the prices of those products could decline by about 18 percent.

For instance, the price of flour could drop by 18 percent or N10,620; rice by N14,400; indomie by N1,404; bread loaf by N288; and wheat flour by N2,286, all things being equal.

A similar reduction of N174.4 could be applied for cooking gas which currently sells for about N980/kg.

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Speaking on Channels Television on Thursday, June 6, Desola Sunmoni, a senior analyst at FDC, said the proposed suspension was a positive one as import duty adds to input costs of production.




     

     

    He said, “Since last year we have seen that the efforts by the government have not yielded the fruits and so this is a welcome development, particularly on plan removal of levies of staple foods and fertiliser.

    “I think it will help reduce the landing costs of these commodities and reduce the pressure of prices and boost domestic production of some of these commodities.”

    The hardship Nigerians are going through is also captured in another report, ‘Accelerated Stabilisation and Advancement Plan (ASAP),’ presented to the Nigerian President by the minister of finance and coordinating minister of the economy, Wale Edun, on Wednesday, June 5.

    It shows that by August this year, 31 million Nigerians will be in ‘crisis’ of food security. This is even as The ICIR has severally referenced that over 63 percent or 133 million Nigerians are faced with multidimensional poverty.

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