Nigeria Customs – Exiting the era of ‘contracted services’

October 30, 2012 — Leave a comment

Goodluck Jonathan addressing the WCO in June 2012

As the Nigeria Customs Service (NCS) gets set to assume all hitherto contracted services from the service providers come December 31, 2012, kudos must be given to the administration of President Goodluck Jonathan for the political will which has brought this to fruition. This is a highly significant development that should encourage other African nations to follow suit.

Over the years, the functions of the Customs administrations have evolved from revenue collection to include protection of industries, protection of citizens, trade facilitation as well as trade security and environmental issues and Customs administrations have continued to improve with the dynamism brought about by the evolving global world.

Therefore, if any country must rely on contracting core Customs services to private companies, then such a country should as well disband its Customs administration. What this means is that no one can ‘Captain’ a ship better than a ‘Captain’, even the best pilot in the world would fail woefully when saddled with sailing a ship.

This is because, whilst it is necessary to contract some of these services to the private sector, such services are usually treated by benefiting firms as mere business ventures and as such, create a situation where governments use such contracts to benefit close allies, even as organisations will go to the extremes to secure such contracts, primarily for profit making.

Having critically studied the scenario, the World Customs Organisation (WCO), summed up that such practice usually results in a situation where there will be no trust in the Customs frontline and post clearance capability. This has prompted the Organisation to, in recent years, develop several diagnostic studies and programmes aimed at championing broader international Customs capability with high benefits to governments of its member countries.

Findings have however, shown that governments may choose the private-sector to complement its resources and capabilities in which supporting operations ranging from printing Customs legislation and tariff to designing Customs websites, repairing and maintaining facilities and equipment and conducting research into specific topics may be outsourced to private companies.

Core Customs responsibilities were also, through contracts with a government, outsourced to private companies that conduct pre-shipment Inspection (PSI) or Destination Inspection (DI) activities. As their names suggest, PSI activities are conducted in exporting countries in order to verify the quality, quantity, price and classification of such exported goods, while DI activities are carried out in combination with scanning technology on imported goods in importing countries.

However, this option, according to the world Customs body, has been observed to be usually more cost effective than in-house operations for many reasons including the stimulation provided by competition in the private sector.

It is therefore time that such organisations which front themselves with the ‘be all’ systems in Customs tariff and valuation appraisal rather seek a more practical and benefit-delivering model than one which not only scams governments of service and inspection fees, but also offers no benefit to trade.

Some of them offer government free cargo scanning equipment in exchange for a lucrative inspection fee. None of this is based on risk management and mostly purely profit focussed. The concept forgoes most, if not all the modern Customs principles and standards promoted by the WCO.

Rather than this concept which adds no value to trade, the focus of government should be capacity building for Customs officers; and with a commitment to capacity building under the Dikko-led management, the NCS now has capable hands to take-over the running of all its functions, and thereby retaining capital flight.

It is worthy to note that PSI and DI is normally introduced to enhance Customs functions as a stop-gap measure while waiting for Customs reforms and modernisation.

According to the WTO, as at November 2011, at least 25 countries, most of which are in sub-Sahara Africa, had contracts with private inspection entities for PSI and DI of which Nigeria was one of them, but this would no longer be after 31st December, 2012, when Nigeria would exit from that category.

Furthermore, it is also important to note that the WCO position is that such contracted core Customs services should not be considered as a permanent substitute for the Customs administration, but only as a temporary measure.

As a consequence of critical assessments of the performance of inspection companies and inefficient capacity-building and training activities, many Customs administrations have exited these outsourcing contracts and the WCO, with its accumulated knowledge, is able to assist its members with the process of discontinuing these contracts.

Nonetheless, there are certain circumstances where the hiring of inspection companies could be justified because of lack of expertise as in the case of post-conflict reconstruction situation. However, in such cases, contracts with PSI, DI companies as service providers should be accompanied by an active exit plan strategy within the context of a capacity-building or Customs modernisation programme. Even the PSI companies are in this case, expected to work in compliance with the WTO agreement on PSI and relevant WTO’s recommendations.

When Abdullahi Dikko, on assumption of office as Comptroller-General of the Nigeria Customs Service in 2009, began a campaign for the modernisation of the NCS as captured in his six point agenda with more emphasis on capacity building and improved welfare, he was criticised for embarking on such a capital intensive venture by many, who then didn’t believe in his vision. But today, the result of the huge investment on capacity building is evident as the NCS, come December 31, 2012, would pride itself among the 21st century Customs administrations, measuring with its counterparts in developed countries, by taking over full control of all Customs operations.

There are arguments that the outsourcing of supporting functions to the private sector enables the Customs administration to focus their scarce resources on their functions, but this is no longer the case with the NCS.

Facts have shown a sharp rise in the resources of the Service due to an improved revenue collection. Monthly collection has risen from the inherited N30 billion to N90 billion. The increased revenue collection has made it possible for Customs officers to have a 100 per cent salary increase and even freeing more resources for the acquisition of quarters for officers and men, renovation of Customs barracks nationwide, provision of staff buses, uniforms and clinics in most commands.

This landmark achievements have been made successful with the full deployment of the NICIS platform for e-Customs declaration and processing, manifest submission, duty payment and final release. Records show that e-manifest processing which usually took seven days and above in 2009, is now been processed same day. Same goes for e-remittance processing. Same transformation has being noticed in the number of processed SGDs which has risen from an average of 367,897 in 2009 to about 526,604 currently.

Summarily, it must be noted that the scanning aspect of the Customs supply chain security paradigm contributed to the evolution from pre-shipment inspection to destination inspection. Traditionally, many developed countries, especially in Africa, employ companies from developed countries to do pre-shipment inspection of imports to Africa primarily for classification and valuation purposes.

The pressure to consider exports as well as imports and for national security contributed to the emergence of destination inspection companies, where the Customs controls are conducted in the African country. This has reduced the internal costs of such service companies and increased their incomes but has done little or nothing to reduce checks at the border or import points. Source: Leadership (Nigeria)

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