After a brief lull in vehicular traffic through its port following Nigeria's ban on importation of cars through land borders, Benin Republic has crashed its rate on transit charge in a bid to provide more incentives for users of its ports.
And the strategy has started paying off with about 200 percent increase in vehicular traffic through its Port of Cotonou. From just 3,500 cars handled in January 2017, the month the ban by the Nigerian government took effect, more than 10,000 cars were shipped in through their port in July, six months later.
In fact, the Beninoise authorities are confident that traffic will soon close in on its pre-ban level of over 25,000 units per month.
The transit charge for cars imported through the Port of Cotonou was reduced to CFA290,000 (N186,000) from the old rate of CFA399,920 (N257,000) following the ban by the Nigerian government. This represents a reduction of 38.1 percent
The measure by the Benin government was complimented by the high duty imposed on imported fairly used cars by Nigeria when a minimum duty rate of 35 percent was effected. With an additional surcharge of 35 percent, the total duty and taxes required to clear cars from Nigerian ports amounted to over 70 percent.
Although it was projected to discourage the importation of fairly vehicles, the crash of the exchange rate of the naira has made the cost prohibitive. Despite the ban on importation through land borders, more importers are resorting to using the porous borders on Nigeria's western frontier to smuggle in the cars shipped in through Cotonou.
The knowledge that cars intercepted by operatives of the Nigeria Customs Service will be seized has not deterred the smugglers. Virtually no revenue is earned by Nigeria on the smuggled cars while Benin republic collects the transit charge that fuels its economy.
A freight forwarder who regularly uses the smuggling channel to bring cars into Nigeria said if importers play by the rules, they stand the risk of making no sales as the cost will be too prohibitive for people to afford.
"If I pay 35 percent duty and another 35 percent surcharge, how can I sell the cars? Nobody will afford them," he said, adding that the initial fear of running foul of the law has been overcome by the imperative not just to remain in business but also to remain competitive.
Experts had cautioned that rather play into in the hands of the Benin government by adopting measures that will reduce patronage of Nigerian ports, induce smuggling and deny the country requisite revenue, the federal government should engage its Beninoise counterpart and explore ways of persuading the country and others in the west African subregion to adopt the Common External Tarrif (CET).
The CET which was adopted by the Economic Community of West African States (ECOWAS) recommends that member countries adopt a common tarrif that provides for a flexible differential band of maximum five percent. Invariably, the difference in tarrif on goods among ECOWAS countries would not have been more than five percent.
However, most of the subregion's economic bloc members, especially Benin republic have failed to implement the CET.
More than 90 percent of all vehicles shipped in through Cotonou port are ultimately find their way into Nigeria. It is a strategy that has continuously oiled the Beninoise economy but has been frustrating policy makers and economic planners in Nigeria.