Trade Policy vs Inflation: How Import Levies and Taxes Are Being Used in Response to Pressure

Inflation has become one of the most pressing challenges for Nigeria’s economy in recent years. With food, fuel, and essential goods becoming more expensive, the government has found itself

under pressure to find solutions that can ease the burden on households and businesses. One area where this tension plays out most visibly is in trade and import policy. Levies, surcharges, and taxes are often introduced to raise government revenue or protect local industries. But when inflation bites too hard, these same measures are sometimes suspended or reversed to prevent further strain on prices.

Two recent examples stand out: the suspension of the Free on Board (FOB) levy and the delayed introduction of a fuel surcharge on imported goods. These decisions show how Nigeria’s policymakers are adapting trade rules in real time, balancing the need for revenue with the equally urgent need to keep inflation under control.

The FOB Levy Suspension

The FOB levy was originally designed as a charge on shipping costs, calculated on the “Free on Board” value of imported goods. In practice, this meant importers had to pay an extra fee tied to the price of goods being shipped into the country. For the government, it was an attractive way to generate more revenue at a time when budget deficits were widening. But for businesses, the levy added another layer of cost in an already difficult environment where the naira was weak, energy costs were high, and consumer demand was falling.

Importers quickly raised alarms that the FOB levy would translate into higher prices for consumers. A container of essential goods, from food to electronics, would arrive more expensive, forcing traders to pass those costs down the chain. The predictable outcome was inflationary pressure, especially on products already considered essential to households and small businesses.

Faced with these realities, the government decided to suspend the levy. This move was widely welcomed by the private sector as it removed an immediate burden on importers and helped to slow down price increases.

While the government lost a potential source of revenue, the suspension was framed as a necessary step to avoid worsening inflation and keep goods accessible to the average Nigerian.

The Delayed Fuel Surcharge

A similar story played out with the proposed fuel surcharge on imported goods. The idea was simple: importers would pay a fee tied to rising energy costs, helping the government cushion itself from the budgetary effects of volatile oil and fuel markets. On paper, it looked like a smart way to align trade policy with the realities of global fuel prices.

But in practice, businesses argued that the timing could not have been worse. Transportation and logistics costs were already at record highs due to fuel subsidy removals and rising global oil prices. Adding a surcharge would sharply increase the landed cost of goods, making imports more expensive and threatening to push inflation even higher.

After consultations and pressure from stakeholders, the government chose to delay the implementation of this surcharge. Much like the FOB levy suspension, the decision reflected an acknowledgement that price stability, however fragile, was more urgent than new taxes.

Inflation and Trade Policy: A Tug of War

At its core, the tug of war between trade policy and inflation management is about timing. When the economy is overheating and inflation is high, additional import taxes may do more harm than good. But when prices are relatively stable, such levies can help government revenues without causing sharp price hikes.

What the suspension of the FOB levy and the delay of the fuel surcharge show is that Nigeria’s government is willing to listen and adapt to market realities. Instead of rigidly sticking to revenue-raising policies, it is making pragmatic adjustments to avoid worsening inflationary pain.

Trade policy in Nigeria today is not just about customs regulations and government revenue; it is also a frontline tool in the battle against inflation. The suspension of the FOB levy and the delayed fuel surcharge are prime examples of how levies and taxes are being used, adjusted, and even reversed in real time.

For households, these decisions offer a measure of relief, keeping prices from rising too quickly. For businesses, they provide short-term cost savings but also highlight the uncertainty of operating in an environment where trade rules shift with economic pressures.

In the end, the challenge remains finding a sustainable balance: raising the funds needed to support development without choking the economy through higher inflation. The way Nigeria continues to handle this balance will shape both consumer welfare and business confidence in the years ahead.