The Nigeria Tax Act, 2025, together with reforms to the Customs and Excise Management provisions provides greater transparency, modernizes digital assessment and payment, and clearly defines the powers and limits of the Nigeria Customs Service (NCS) as the agency in charge of both customs and excise revenues on behalf of the Federal Government.
1. What Customs and Excise Duties Really Are
Both taxes target goods, but at different stages of their journey.
- Customs Duty is a tax on goods entering or leaving Nigeria’s borders. It applies to imports and, in some cases, exports.
- Excise Duty is a tax on goods produced within Nigeria, usually on specific goods considered “exciseable” — alcohol, tobacco, petroleum products, sweetened beverages, and certain luxury or environmentally harmful goods.
Together, these duties serve a dual purpose: they generate revenue for the government and regulate trade to protect local industries and public health.
2. Who Collects and Manages Them
Under the 2025 Tax Act, the Nigeria Customs Service (NCS) remains the sole authority for the assessment, collection, and remittance of customs and excise duties. However, the NCS now operates under the fiscal supervision of the Nigeria Revenue Service (NRS), the restructured successor to the Federal Inland Revenue Service, thus, ensuring that customs revenue is integrated into the unified federal account system through the Single Tax Account framework introduced by the Act.
The Act clarifies that:
- All customs and excise duties are federal revenues;
- The NCS collects them but remits directly to the Federation Account;
- Administrative oversight and audit now involve both the Ministry of Finance and the NRS.
3. How Customs Duties Work
Customs duty is applied when goods are imported into Nigeria (and occasionally when exported). The duty serves three functions: raising revenue, protecting domestic industries, and regulating imports in line with trade policy.
a. Duty Calculation
Customs duty is calculated based on three components:
- Customs Value – the CIF (Cost, Insurance, and Freight) value of the imported goods.
- Tariff Rate – the percentage rate applicable to that product category, drawn from Nigeria’s Common External Tariff (CET) schedule aligned with ECOWAS trade policy.
- Applicable Levies – including special surcharges such as Import Adjustment Tax or ECOWAS Levy where applicable.
Formula:
Customs Duty = CIF Value × Applicable Tariff Rate
For example, if a shipment of electronics worth ₦50 million attracts a 20% duty rate, the customs duty payable will be ₦10 million.
b. Types of Customs Duties
- Ad Valorem Duties – based on the value of the goods (e.g., 20% of CIF).
- Specific Duties – based on quantity or weight (e.g., ₦1,000 per litre or per kilogram).
- Mixed Duties – a combination of both, used for select commodities.
c. Import and Export Context
While most imports attract duties, certain categories, especially essential raw materials, equipment for production, or humanitarian goods, may be duty-free or zero-rated under government policy. On the other hand, exports are generally duty-free, except for a few commodities (like unprocessed timber or scrap metals) where export duties serve to discourage raw material flight and encourage local processing.
4. How Excise Duties Work
Excise duties, by contrast, target locally manufactured goods. They’re not taxes on trade but on domestic production, meant to ensure that producers of certain high-volume or high-impact goods contribute fairly to public revenue.
a. Exciseable Goods
The Act lists exciseable goods as including:
- Alcoholic beverages
- Tobacco products and cigarettes
- Petroleum products
- Non-alcoholic carbonated and sweetened beverages
- Plastic and environmentally hazardous goods
- Certain luxury items
According to the Act, the Minister of Finance, in consultation with the NRS, retains power to add or remove items from the excise list by regulation.
b. Excise Calculation
Excise duty is calculated based on either the ex-factory price or retail price, depending on product type.
Excise Duty = Quantity of Goods × Applicable Excise Rate
Rates vary widely and range from as low as 5% on some beverages to as high as 30% on alcohol and tobacco. For instance, the excise rate for beer may be ₦75 per litre, while tobacco may be taxed both ad valorem (percentage of value) and specific (per stick or pack).
5. What’s New in the 2025 Act
The Nigeria Tax Act, 2025 brings several innovations that modernize the customs and excise framework:
a. Digitalization and the Single Tax Account
All customs and excise payments must now be made through authorized electronic platforms linked to the Single Tax Account system. This ensures transparency, eliminates multiple collections, and creates an audit trail accessible to both NCS and NRS.
b. Simplified Tariff Structure
The Act harmonizes the tariff regime with ECOWAS standards, thus reducing the number of bands and ensuring predictability for importers.
c. Excise Expansion
The excise duty framework now explicitly covers digital products, electronic goods, and locally manufactured devices where applicable, aligning with Nigeria’s shift toward taxing modern consumption patterns.
d. Audit and Enforcement Powers
The NCS gains stronger audit powers to inspect factories, warehouses, and bonded terminals. Manufacturers must keep production and inventory records for at least five years, subject to random inspection.
6. Penalties and Compliance Rules
The Act introduces tougher sanctions to enforce compliance:
- Failure to Declare Imports: 100% of the underpaid duty, plus seizure of goods.
- False Declaration: ₦5 million fine or imprisonment (for corporate officers) on conviction.
- Late Payment of Duty: 10% surcharge plus daily interest until payment.
- Unauthorized Removal of Excise Goods: Forfeiture of goods and penalties up to ₦10 million.
- Smuggling and Evasion: Confiscation of goods, vehicles, and assets used in smuggling, plus criminal prosecution.
All importers and manufacturers are now required to register with the Customs and Excise Division of the NRS portal, ensuring all declarations, invoices, and payments can be cross-referenced in real time.
7. How Revenue Is Shared
Unlike VAT or personal income tax, customs and excise duties are 100% federal revenues. The Nigeria Customs Service collects and remits them into the Federation Account, after which the proceeds are distributed according to the constitutional revenue allocation formula:
- Federal Government: 52.68%
- State Governments: 26.72%
- Local Governments: 20.60%
This structure ensures that even though customs is a federal responsibility, all tiers of government benefit indirectly from trade taxation.
