Highlighting Strategic Importance Of Digital Infrastructure In Import Duty Collection And Accountability
Bashir Adewale Adeniyi, Comptroller General, Nigeria Customs Service
By Bashir Adewale Adeniyi
INTRODUCTION
The ability to connect to people and information has become commonplace and is transforming economies, businesses and society. To harness these opportunities, governments worldwide are transforming and adapting to this technological revolution. Digitalisation is pivotal in enhancing the efficacy of trade facilitation and administration procedures.
In the ever-evolving landscape of global trade and revenue generation/collection, digitalisation has emerged as a transformative force, leveraging information and communication technologies(ICT) and digital solutions to revolutionize traditional trade processes.
The Nigeria Customs Service (NCS) has since embraced the use of digital and technological innovations not just for its modernization project drive but also as a pathway to more transparent, efficient, and effective operations. As trade volumes grow, adopting digital solutions aligns with the Service’s larger goals of improving trade facilitationand boosting revenue collectionand accountability.
Digital infrastructure refers to the designated physical and software-based components working together to relay information and digital products and services from one point to another. They include, but are not limited to: Networks and digital communication suits, Virtualization and software, and Mobile telecom and broadband. It is against this backdrop that this paper seeks to examine the importance of digital infrastructure in import duty collection and accountability.
The purpose of this paper is to examine the strategic importance of digital infrastructure in Import duty collection and accountability. The paper shall cover an overview of Import duty collection in Nigeria and the importance of digital infrastructure in Import duty collection and accountability.
AIM
This paper aims to highlight the strategic Importance of digital infrastructure in Import duty collection and accountability.
OVERVIEW OF IMPORT DUTY COLLECTIONIN NIGERIA
The NCS is central to Nigeria’s economy, generating significant revenue through the collection of Import duties, Taxes and Levies. However, like many other Customs organisations globally, it has faced several challenges, including manual processes and delays in Customs processes and procedures. In a globalized and highly competitive environment, Customs agencies need to be faster, more reliable, and more transparent. To this end, the NCS has initiated several projects to digitize its operations, which will significantly enhance Import duty collection and overall accountability.
KEY DIGITALIZATION PROJECTS OF THE NCS
There are various key digitalization projects of the NCS. They include: Automated Customs processing systems, E-Customs Modernisation project, Authorised Economic Operator (AEO) and Advanced ruling system.
AUTOMATED CUSTOMS OPERATING SYSTEMS
These systems are at the core of modern Customs operations and are used for automating the submission, processing and verification of Import and Export documentation. Automated systems adopted by NCS include:
Electronic payment platform. The use of e-payment systems for
Customs duties and taxes have greatly enhancedthe transparency and efficiency of revenue collection. Traders pay duties electronically through collecting banks while the banks remit to CBN within 24 hours, thereby reducing the delays and risks associated with cash transactions. These platforms provide a secure and auditable record of payments, ensuring accountability and minimizing revenue leakages.
Automated System for Customs Data (ASYCUDA).ASYCUDA an
electronic system devised under the auspices of UNCTAD (the United Nations Conference for Trade and Development) was introduced into NCS operations in 1990. It was replaced by ASYCUDA 2.7 version in early 2000 and further upgraded to ASYCUDA 3.0” or “ASYCUDA++” between 2006 – 2010. The resultant effect of the system provided NCS with an efficient, integrated and automated control platform to monitor cargo travelling across borders within a framework of Customs clearance laws, regulations and processing.
Nigeria Integrated Customs Information System (NICIS).Adopted
in 2014, the implementation of NICIS saw the incorporation of additional features which paved way for advanced digital systems such as Single Window operation in the clearance process. Lessons learned from the implementation of NICIS I informed the design and deployment of subsequent systems, such as NICIS II and the broader e-Customs Project.
Nigeria Integrated Customs Information System (NICIS II).The
NCSmigrated from NICIS to NICIS II in 2017, making it possible for the Service to achieve a paradigm shift from manual Customs procedures to paperless e-Customs procedures. The Service was able to handle larger volumes of trade data, automating the process of documentation, duty assessment and goods clearance.
NCS MODERNIZATION PROJECT
The NCS Modernization Project, a flagship project of the NCS is a Public Partnership Program expected to generate over $176 billion in revenue for the Nigerian government over a 20-year concession period. The project aims to fully automate customs operations and integrate various stakeholders in the trade ecosystem, including the port authorities, shipping companies, and government agencies.
Upon full implementation, the project is envisioned to deploy e-Customs applications and systems such as e-clearance, e-Port System, e-Risk Control Centre (RCC), Logistics Management Systems (LMS), Electric Cargo Tracking System (ECTS), Intelligent Gate (i-Gate) and Mobile Enforcement (ME) among others. The e-Customs Modernization Project reduces the likelihood of mistakes and errors by removing human intermediaries and making transactions fully transparent and auditable. Real-time data on Imports, Exports and duty payments are available to customs officials, making it easier to detect anomalies and discrepancies.
AUTHORIZED ECONOMIC OPERATOR (AEO) PROGRAM
The AEO Program launched by NCS in August 2023 is part of the World Customs Organization’s (WCO) SAFE Framework of Standards, designed to enhance security in the supply chain while facilitating trade. Through the AEO initiative, compliant and trusted businesses are granted expedited clearance of goods, reduced inspections, and priority treatment. This program not only streamlines Import/Export processes but also strengthens accountability as traders who consistently meet regulatory standards are rewarded with fewer barriers.
The AEO Program’s reliance on digital infrastructure allows for real-time verification of compliance records, ensuring that duties are accurately calculated and collected. This fosters trust between the Customs authority and the business community while reducing revenue leakages caused by smuggling or underreporting.
ADVANCED RULING SYSTEM
The Advance Ruling System is another strategic project under the NCS modernization efforts, offering predictability and transparency to traders. It enables traders to obtain binding rulings on the classification, origin and Customs valuation of goods before importation. This system significantly reduces the uncertainties surrounding duty payments, ensuring that duties are properly assessed and that traders can plan for accurate cost projections.
By digitizing this process, the NCS eliminates delays in decision-making and enhances transparency, ensuring accountability in duty collection. The Advance Ruling System is expected to increase compliance as traders have clarity on their obligations well in advance of their goods entering Nigerian ports, minimizing disputes and underpayment of duties. The Advance Ruling Program was launched by NCS on 2ndMay, 2024.
IMPORTANCE OF DIGITAL INFRASTRUCTURE IN IMPORT DUTY COLLECTION AND ACCOUNTABILITY
The importance of Digital infrastructure in Import duty collection accountability cannot be over-emphasised. They include enhanced efficiency and speed, improved transparency and accountability, increased revenue collection and integration of stakeholders.
ENHANCED EFFICIENCY AND SPEED
Digital infrastructure automates key processes in import duty collection, minimizing manual errors and reducing time delays. Systems like NICIS II streamline Import/Export documentation, ensuring that duties are assessed in real time. This results in faster clearance processes, ensuring goods flow through Nigerian ports more efficiently while securing the necessary revenue.
IMPROVED TRANSPARENCY AND ACCOUNTABILITY
The NCS ModernisationProject provides a transparent and traceable record of all transactions. This enhances accountability, such that once duty payments are logged, they cannot be altered or deleted. Combined with real-time audit capabilities, this makes it difficult to manipulate Import data, significantly enhancing transparency.
INCREASED REVENUE COLLECTION
Digital platforms such as the e-payment systems integrated into the NCS’s digital infrastructure allow for seamless Import duty payment andreduce revenue leakages. By cutting down on bureaucratic delays and simplifying payment processes, the NCS can ensure that more revenue is collected on time. Systems like the AEO Program and the Advance Ruling System help mitigate instances of duty evasion and underreporting, which have been major issues in the past.
The NCS has been able to generate revenue from January to September, 2024 to the tune of Four Trillion, Two Hundred and eighty Nine Billion, Seven Hundred and thirty two Million, Four Hundred and Fifty eight Thousand, and Fifty Four naira Only (=N=4,289,732,458,054.00) while in the corresponding year, 2023, the service was able to generate a revenue sum of 3.21 Trillion as also compared to the year, 2022 when the service was able to generate the sum of 2.60 Trillion. This Year-on-Year improvements on import duty collection shows a marked improvement by measures put in place by the Central Bank of Nigeria and Commercial Banks in the adoption of Digital infrastructure. This has in turn assisted the service in improving on transparency and accountability.
INTEGRATION OF STAKEHOLDERS
One of the key components of the e-Customs Modernization Project is the integration of various stakeholders into one digital platform. This system promotes transparency by ensuring that all parties from Importers to port operators are involved in the Customs process. Real-time information sharing ensures that all parties are held accountable, reducing the chances of fraud or discrepancies in duty collection.
CHALLENGES IN IMPLEMENTING DIGITAL INFRASTRUCTURE
While the benefits are evident, certain challenges hinder the full implementation of digital infrastructure within the NCS:
a. High Initial Costs. Developing and maintaining digitalInfrastructurerequires significant investment, which can be a barrier, particularly in developing nations.
b. Resistance to Change. Personnel accustomed to manual processes may resist adopting new technologies, necessitating robust training and change management strategies.
c. Cybersecurity Risks. With increased digitalisation comes the risk of cyber-attacks, which can compromise sensitive trade and customs data.The NCS has invested in cybersecurity solutions to safeguard its digital infrastructure.
d. Technical Skills Deficit. The shift to digital systems requires a workforce skilled in handling new technologies. Continuous training and capacity building will be essential to the success of these initiatives.
CURRENT EFFORTS/ SOLUTIONS FOR IMPROVEMENT
The Nigeria Customs Service has already made strides in adopting digital solutions such as ASYCUDA and NICIS II platform, which have improved trade facilitation and Import duty collection. However, there is still a lot of room for improvement. Hence the need for the development and deployment of the new clearance system before the end of the year.
EXPANDING USE OF AI AND MACHINE LEARNING
The use of AI and machine learning for risk management is an area that remains underutilized but with the implementation of the new clearance system under the NCS Modernisation project, these technologies will help identify suspicious activities and shipments that require further investigation, improving efficiency and preventing revenue losses.Advanced data analytics is used to identify patterns and trends in import data, helping customs authorities to better manage risks and allocate resources effectively
PUBLIC-PRIVATE PARTNERSHIPS
The development of digital infrastructure can be costly, but through partnerships with private sector in the NCS Modernisation project, the NCS can leverage cutting-edge technologies and expertise without overburdening the national budget.
INTERNATIONAL COOPERATION
Digital infrastructure facilitates better coordination and information sharing between customs authorities of different countries, enhancing global trade security and compliance. NCS is currently integrating the Universal postal Union system developed in collaboration with World Customs Organisation (WCO) for all postal Service Authority and customs. This system provides advance information on E-Commerce goods.
CONCLUSION
The strategic importance of digital infrastructure in import duty collection and accountability cannot be overstated. The NCS Modernisation Project, AEO Program, and Advance Ruling System are a testament to NCS’s commitment to creating a more efficient and transparent customs environment. By fully embracing digital solutions, the NCS has enhanced revenue collection, streamlined customs operations, and improved Nigeria’s standing in the global trade community. However, challenges such as high costs and cybersecurity risks must be carefully managed to sustain the gains achieved by these initiatives.
Being the presentation by Bashir Adewale Adeniyi, MFR, fnipr, dsm, the Comptroller General of Customs, at the 2024 FiBOP capacity building workshop in Lagos.
