We congratulate the newly appointed Chairman of the Steering Committee on The Presidential Initiative on Compressed Natural Gas (PICNG). We however wish to promptly bring to your attention the rather ‘cut throat’ newly revised Import Adjustment Tax (IAT) of 40 percentage for containers of Compressed Natural Gas (CNG) and or Liquefied Petroleum Gas (LPG) which has now brought total tariff payable for this item to 67.5 percent.

We see this development as a mockery of the Gas Economic Policy of Mr President and by an extension, a direct huddle to this novel aspirations.

We unequivocally state that it is a mild statement to pass a comment on the tariff as bogus and excessive, compelling us therefore to canvass a prompt review of it. There can be no gas utility without its containment or storage in steel pressure vessels as Gas containers or tanks remains a compulsory part of any gas utility infrastructure. CNG or LPG powered vehicles will need refueling stations across the country and you need to transport and store the gas in containers.

But sadly, the proposed Gas Based Economy is at present being threatened by this unrealistic tariff on the Storage Tanks which is one of the key components of Gas Utility as stated above.

A further breakdown of this exorbitant tariff will convince you of the need to expedite action on the need for an urgent downward review of it.

At present, the total tariffs on Gas containers/storage under the Customs and Excise Tariffs (CET) stand at 67.5 percent. These consist of 20 percent ID, 7.5 percent VAT and 49 percentage IAT. Without mincing words, it is a big surprise to us that an item as crucial as this to our Gas Economy Aspiration carries the highest taxes in the whole of the nation’s Customs and Excise Tariffs.

As it is widely known, Tariffs have three primary functions: to serve as a source of revenue, to protect domestic industries, and to remedy trade distortions (punitive function). The revenue function comes from the fact that the income from tariffs provides governments with a source of funding.

In the past, the function of revenue was indeed one of the major reasons for introducing tariffs, but economic development and the creation of Systematic Domestic Tax have reduced its importance. For example, Japan generates about one trillion Yen in tariff revenue, but this is less than two percent of Total Tax Revenues (Fiscal 1996).

In our case, Nigeria will certainly earn more income from vast Domestic Gas Consumption under a Gas Based Economy than possibly from Import Tariffs on Gas Utility Facilities and tools such as storage or containers. Therefore, our focus should be on the potential revenue from Domestic Gas Consumption.

Tariff is also a policy tool to protect domestic industries by changing the conditions under which goods compete in such a way that competitive imports are placed at a disadvantaged position.

Unfortunately we are yet to succeed with steel production in Nigeria. As stated earlier, no single mill produces rolled steel sheets which is the sole material for manufacturing pressure vessels for gas containment and or storage.

Pressure Vessel manufacturing will naturally be part of the viable attendant ventures that will emerge once we achieve our iron and steel dream. Until then, there can be no significant domestic investment in manufacturing of pressure vessels for gas containment or storage that justifies the current outrageous tariff of 67.5 percent for the importation of this item, more so when we desperately need to have a robust gas economy.

Obviously, with the above postulations, there is no justification for the current outrageous tariff of 67.5 percent on the importation of this item. Therefore, it is crystal clear that for now, there is no industry being protected via this cut throat tariff.

It is our firm belief that if we must thrive as a nation in our quest towards making Gas the anchor of our economic drive, the huge tariffs on the importation of the gas tanks must be completely removed.

It remains a big surprise to us that this aspect unlike other items under the Article of Iron and Steel Chapter in the CET, Containers for compressed or liquefied gas carries the highest taxes of 67.5 percent. We unequivocally believe that this must have either been done in an error or some economic saboteurs may deliberately be at work to discourage continued flow of investments in gas infrastructure.

It is not a rocket science or an abstract economic theory to know that if Gas must be a common thing on Nigerian streets, the item for its containment or storage must be easier to come by. But, it will remain a tall dream under this ridiculous tariff of 67.5 percentage on the importation of the Gas Storage Tanks.
Our prayers shall therefore include the following:

That the skyrocketed taxes of 67.5 per cent on the importation of Gas Storage Tanks be waived to ease the entry point into the business and/or

A drastic reduction in the tariffs on the imported Gas Storage Tanks in order to cut down the prices of all categories of Gas consumed in Nigeria.

Odediran is Coordinator, Gas Nigeria Initiative (GNI).