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COMPARATIVE ANALYSIS OF THE EFFECTS OF THE FEDERAL GOVERNMENT IMPORTS DUTY POLICIES IN NIGERIA IN THE YEARS 1990-1995

CHAPTER ONE

INTRODUCTION

1.1   Background of Study

        The Nigeria Economy has undergone structural changes in the past three decades form a freedom agriculture economy in the 1960’s to an economy mainly reliant on oil from the mid 1970’s.

        The phenomenal growth in earnings in the mid 1990’s was not fully internalized into the economic system.  The result was that the consumption production pattern became largely import oriented inability to rationalize imports when the oil boom gave way to oil glut led to emergence of trade arrears.  A great debt burden also surfaced from 1978 to the early 1980’s as a result of Jumbo loans from the international capital market external debt outstanding shot up drastically from us $593.6 million in 1976 to us $2.2 billion in 1978? Thereafter, the spate of borrowing increased with the entry of state government into large external loan contractual obligations.  Thus, by 1983, the total external debt stock was us $18.6 billion in 1986.  It rose further to us $29.4 at the end of December 1994, the pursuit of an over-valued exchange rate policy.  The subsequent relegation of the agriculture sector to the background; heavy public sector spending and the huge over, hang; all combined to create distortions in the production, consumption and payment patterns.  The precipitation decline in oil earnings in the 1990’s necessitated a policy redirection, aimed at realigning the domestic production pattern with the local resources base.

        Most less developed countries including Nigeria have turned to import-substitution policy in order to become self reliant and to help develop indigenous industries that we need raw material in order to produce these products.  Most of these imputs are not availably locally, consequently.  The industries depend heavily on imported inputs of law materials, machinery, capital equipments and the consumer goods.  Generally speaking, a nation volume of import is a positive function of its imports and its income tall, it is import will also fall.  This relationship is made intuitively apparent by considering the two great components of income in the economy: investment expenditure and consumption.

        An increase in investment, that is the addition of plant and equipment to our capital stocks means that we must increase our imports.  If nothing else, we must buy from abroad a number of raw materials that we ourselves do not posses in sufficient quantities and similarly, with consumption goods.  These will be imported as people’s real income rises, they will buy more and more goods and some of these will be imported.

        Automobiles refrigerator are good example therefore, to curtail excessive importation, a complementary development in the agricultural sector, which provides the earnings necessary to finance the minimum level of import required to sustain the continued growth of the local industries is necessary since the adverse effect of too much reliance on imported inputs has also been clearly demonstrated in the agricultural sector where substantial increases in the costs of Agricultural modernizations.

        Unfortunately, the policies adopted to reserve the domestic products primary tariffs is some how biased in the effect against production for exports.  This is one of the problems of less developed countries who rely on import-substitution as a means of developing their economics.

        The system of production is adopted, and it consists primarily of the use of import duty policies/restrictions, which take various forms including outright ban, or total prohibition or tariffs, duty free on some items, the imposition of import quotes, foreign exchange control, invisible tariff in the form of introduction of comprehensive import supervision scheme or the placing of specific commodities on license.  These policies are aimed at either shutting out competition entirely or to give domestic producers a significant cost advantage over foreign producers and most importantly protect the country against being used as a dumping ground for interior goods.

1.2   Statement of the Problem

        Form the 1990 to data, Nigeria has been confronted with some major economic problems inspite of all the various laudable policies adopted to solve these problems most time the revenue expected to be generated fell fellow the expectations.  Could it be that the implementation was faulty? There also exists lack of dedication on the part of citizens co-operate with government – for example, smuggling and currency trafficking are factors that have hindered the full attainment of the import duty policies for desired economic result.

1.3   Purpose of the Study

        The aim of this study in view of the problem identified above are thus:

i.            To examine the import duty policies formulation in Nigeria from 1990-1995 and discover the extent the policies have achieved the core objectives for which they are imposed.

ii.          To evaluate the general influence of these policies on the productivity and social well being of firms and individuals in the country’s.

iii.         To determine the factors that detracted a smooth viable economic growth, stable, strong and self-reliant nation; and

iv.        To make suggestions on ways of improving on the policies to remedy the situation.

1.4   Significance of the Study

        The awareness of the role of import duty policies frame work and its effect on economic performance is essential for all economic units, individuals, businesses etc.  The degree of industrialization indirectly shows the stage on economy is in production.  Capacity to be worthwhile, the government has to set policy measures that are conducive for investors.  Custom duties and import duties on raw-materials and equipment that cannot be sources locally, form the set of fund a mental issues that need to be addressed to make investments attractive, improve on the balance payment problem, curtail the inflection in domestic prices/inflation rate, and improve on the marginal propensity to consume.  Per capital income marginal propensity to save and invest are also some of the benefits that could be derived from proper implementation of import duty policies.  High import duties on goods, that can be manufactured locally rhymes with the need to protect the local goods from unhealthy foreign competition.

        Due to the indispensable need for a Nigeria firm as a united strong and self-reliant nation a great and dynamic society, a land of bright and full opportunities for all citizens is contained by second National Development plan this study would be of benefit to.

1.4   Research Questions

i.            Why is it that import duty policies are not bringing about enough economic stability and growth in Nigeria? Do they posses the required components to further economic growth?

ii.          Are scarcity of essential goods and inflation caused by these tariffs perse?

iii.         Are the policies of import duty in Nigeria consistent with our economic environment? Or is the Nation establishing factories that are not consistent with her economic environment?

iv.        Could there be any remedies to these problems?

1.6   Delimitation of the Study

        The scope of this paper covers the years between 1990 and 1995: the focus is on the import duty policies formulated in these years and the effects of these measures on the economic-analysis based on the major economic indicators and whether these measures have achieved their primary objectives.

1.7   Limitation of the Study

        It must be admitted that some difficulties were encountered in obtaining the materials required for this study which include:

-             Restricted access to government and classified documents.

-             Scarcity of up to date materials on import policies formulation.

-             Time and financial constraints which hampered additional visits that might have been taken to other places plans the inevitable human factors.

1.8   Definition of Terms

i.      Balance of Payment (BOP):  There are records of economic transactions between a country and the rest of the world.  The three major components of (BOP) are current account, capital account comprises of transaction arising from the sale or purchase of goods and services.  The official settlement account match any unbalance in the current or capital account so that all BOP accounts sum to zero.

ii.     Class: Comprehension import supervision.

Scheme: This scheme was set up to ensure that imports into Nigeria are of the correct quality, value and quantity.

iii.    Consumer Expenditure: These are expenditure made by consumers for consumer goods and services such goods could be tangible or intangible.

iv.    Exchange Rate:  This is the price of one currency in terms of another.

v.     Foreign Exchange:  This is a means of international payment.  It includes currencies of other countries that are freely acceptable in affecting international financial transaction.

vi.    GNP (Gross National Product): Definitionally gross national product is the country’s output of currently produced goods and services valued at current market prices; it is the nationals’ total income.

vii.   Inflation Rate: The speed or rate at which the general price level are increasing.

viii.   IDR (Import Duty Repot): It is a customs document issued of imports decree of 1978 certifying that imported goods meet the required specifications in terms a quality and quantity.

ix.    Investment Expenditure:  These are the expenditure on plant and equipment made by business firms.  The motive lying behind investment is profit making.

x.     Marginal Propensity to Save: That degree of increase in investment due to an increase income.

xi.    Marginal Propensity to Invest:  That degree of increase in investment due to an increase in income.

xii.   Per Capital Income:  A method of assessing the standard of living in any country.  It involves determining potential income per person in an economy.

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