INVESTIGATION: West Africa’s Illicit Tobacco Trade Hits Nigeria’s Revenue

9362
Cigarettes-Tobacco
Cigarettes-Tobacco

Unlike other trafficked goods that cause fear for the men of the underworld, cigarette smuggling out of Benin and Togo is not a risky enterprise for any smuggler.

“We have other worries to deal with and trafficking of cigarettes is not one of them”, said a former smuggler, Adebo Sukanmi, standing four metres away from the Customs border post in Idiroko — Nigeria’s border territory with Benin Republic to the west.

“I started moving goods in and out of the border at the age of 16 and cigarettes were the first item that caught my attention. It’s so easy to move them,” said 41-year-old Sukanmi.

According to him, tobacco smuggling often goes undetected because large consignments of cigarettes could be trafficked bit by bit across the border, despite the numerous customs checks.

The methods vary: from women hiding them in their underwear and tucking them beneath their free flowing dresses to the burying of cigarettes inside frequently-smuggled goods like rice (Nigeria’s staple food) and even under the bonnets of vehicles. The smugglers never run out of cunning ideas as they travel back and forth throughout the day.

A smuggler in Idiroko (Nigeria’s border territory with Benin) lays smuggled cigarettes away in the glove compartment of a car before dusk as he prepares to embark on the tortuous journey of the night. A tobacco distributor is waiting on the other side of the action in Lagos or in one of the far-flung inner states in Nigeria. (PHOTO: ‘Dotun Akintomide/The New Diplomat)

And when the occasion arises to move cigarettes en masse, legitimate goods for which there are Customs papers will often shield the trafficked cigarettes. Goods hidden this way pass through the shrewdest layers of customs checks and are repackaged and distributed by dealers in Lagos (West Africa’s economic capital) and in other densely populated states like Kano in Nigeria’s northwest which has the highest number of smokers in the country.

The trade in illicit tobacco continues to thrive in Nigeria – Africa’s largest economy — on the back of the shadowy market created by the tobacco industry. And tracking the activities of tobacco companies can be a herculean task, let alone the booming illicit trade in the country.

Data from Global Data Plc indicates that 18.4 billion individual cigarettes were sold in the country in 2015, of which 12.2 billion were domestically produced. Of the figure, illicitly traded cigarettes account for 20 percent, according to a report by Punch Newspaper.

“If 20 percent of the market in Nigeria is being held by counterfeiters and illicit cigarette dealers, then it would mean that Nigeria lost about N1.5 billion in 2017– based on estimates.” Dr. Chukwuka Onyekwena, Executive Director, the Centre for the Study of the Economies of Africa (CSEA) told The New Diplomat.

According to an estimate by CSEA, Nigeria generated about N7.3 billion from excise duty on domestically produced tobacco products in 2017.

Sukanmi said he has since become a clearing and forwarding agent “dealing in general merchandise goods” — a cliché that now has a new meaning. The phrase is popular among Nigerian import dealers. Some of them switch between importation of goods through legal routes, when it suits them, and smuggling to conceal large consignments alongside contraband goods, denying government the accruable import duties.

“In this trade, people become more crafty and sophisticated almost every day,” he said.

“That’s the only way to survive.”

In Idiroko–Nigeria/Benin border territory– Tobacco products belonging to Imperial brands headquartered in Bristol, UK (makers of King Edward) and Swisher Cigar Co.(makers of Blackstone) lay on a vehicle’s engine. They’re to be sheltered by the pockets of spaces available in the vehicle’s bonnet. (Both manufacturers don’t produce in Nigeria) PHOTO: ‘Dotun Akintomide/The New Diplomat

Tobacco Tax Increase

Amidst the sometimes patchy implementation of the National Tobacco Control (NTC) Act  2015, government managed to raise excise tax duty on tobacco products in June 2018. The increase came after many years of industry sabotage as operators tried to dissuade government with the argument that a tax increase could aggravate illicit trade.

A report – ‘Smokescreen for Smuggling’ by Corporate Accountability International said this fits the sort of argument the tobacco industry around the world always put forward each time government jacks up tobacco taxes. The report also stated that since the adoption of the Illicit Tobacco Trade Protocol in 2012, Philip Morris International (PMI), British American Tobacco (BAT), and Japan Tobacco International (JTI) have been “coordinating a formidable challenge to the world’s first public health treaty,” engaging “powerful trade associations and close allies in top-level government positions.”

This flies against Article 5.3 of the World Health Organization’s Framework Convention on Tobacco Control (FCTC) which requires parties to the agreement to take proactive measures to protect “public health policies with respect to tobacco from commercial and other vested interests of the tobacco industry.”

“There’s a direct conflict of interest between the interest of tobacco corporations and countries that are trying to do the right thing in protecting their citizens from the harms of tobacco products. The confusion that the industry promotes undermines countries with really strong tobacco laws,” Mr. Michél Legendre, Associate Campaign Director, Corporate Accountability based in the U.S said in an interview with The New Diplomat.

Legendre explained that the industry’s machinations often come as a pushback to stop the government from implementing an aggressive tax policy and other stringent tobacco control measures aimed at reducing tobacco-related ailments and deaths globally, which are put at 8 million every year (WHO). Tobacco kills 17,500 Nigerians annually according to figures (Tobacco Atlas, 2015).

The tobacco tax regime between 2018 and 2020 introduced an additional N20 ($0.07) specific tax on each pack of 20 cigarettes in 2018; N40 ($0.13) in 2019. And will rise to eventually N58 ($0.19) per pack in 2020. This amounts to 16.4 percent excise tax burden in overall.

However, the increase is still way below the 75 percent recommended tax burden by the WHO’s FCTC to reduce global tobacco consumption.

“The industry has absorbed the tax and there’s no noticeable increment in the prices of cigarette,” said Mr. Akinbode Oluwafemi, Deputy Director, Environmental Rights Action/Friends of the Earth Nigeria (ERA/FoEN). “A pack of cigarettes is still between N200 ($0.5) and N300 ($0.8) in Nigeria which is reasonably low.”

If government stay true to the implementation of the new tobacco tax regime, a Tobacco Excise Tax Simulation Model (TETSiM) designed by CSEA had projected that excise duty revenue from tobacco products could increase by over 500 percent to N39.3 billion ($128.5 million) in three years.

However, a Freedom of Information request to obtain figures from the Finance Ministry and the Nigeria Customs Service Headquarters in Abuja, revealing the actual tobacco revenue since the onset of the tax policy has not so far received a response.

CSEA’s Onyekwena further estimated that if Nigeria’s illicit trade losses is as high as 40 percent as in some developing countries with porous borders, the country in 2017, could have lost about N2.9 billion ($8 million). An amount enough to sink and furnish 9,666 boreholes at N300,000 ($833) each, serving up to five million Nigerians as acute water shortage bites hard. With the burgeoning water crisis, achieving the United Nations’ Sustainable Development Goal 6 (clean water and sanitation for all) by 2030 is now a race against time for the Nigerian government.

Neighbours Sparring

The Economic Community of West African States (ECOWAS) charter provides for free trade between member states, but it must be for goods produced within ECOWAS countries, not imports from other economic blocs.

Contrary to the dictates of the treaty, much of the goods imported and declared for local consumption in Benin and Togo are often smuggled to Nigeria, which constitutes 70 percent and 60 percent of ECOWAS population and economy respectively. The economies of the two West African countries largely depend on how much of their imported goods, including tobacco, get to neighbouring, Nigeria.

In August 2019, President Muhammadu Buhari ordered the closure of all land borders against neighbours. The Nigerian government had offered the explanation that the non-adherence to ECOWAS protocol on transit of goods and the alleged economic infiltration policy towards Nigeria by Benin Republic and other neighbours necessitated the action, seen by many as a self-protecting measure, but not without backlash in certain quarters and across the sub-region.

For instance, The New Diplomat’s investigation shows that most of the tobacco products are often illegally shipped under dubious disguises, using false bills of lading for other commodities.

According to a source who is familiar with West Africa’s cross border smuggling, a large proportion of the smuggled cigarettes are being moved across the border by car smugglers while trying to evade customs duties.

The car smugglers pick up the smuggled tobacco at the behest of the tobacco dealers who would have the imported consignment delivered to them at the seaports in Benin and Togo.

“They stash the cigarettes in the smuggled vehicles alongside some contraband items. Usually, the vehicles move in a convoy to make it difficult for border authorities to stop them in case that there’s any offensive launched at them over failure to negotiate a bribe,” Sisu said, preferring not to use his full name.

Imperial Brands’ popular products around the world — ‘King Edward’ hang on a bonnet’s frame as a smuggler tucks them away from the prying eyes of border officials. (PHOTO: ‘Dotun Akintomide/The New Diplomat)

Speaking on the dealers’ choice of using car smugglers, he revealed that: “It’s easier to engage them because they deliver the smuggled vehicles to agents in different parts of Nigeria. They operate everywhere and can go as far as Niger Republic and Cameroun. As they deliver the vehicles to car dealers, they also deliver exhibits (contraband products, including smuggled tobacco stashed in those vehicles) to the chain of tobacco dealers.”

Meanwhile, in an interview with The New Diplomat, the spokesperson for the Nigeria Customs Service, Mr. Joseph Attah said that it’s not unlikely that the smugglers are being sponsored by tobacco companies.

“Probably they’re being sponsored by tobacco companies, but I wouldn’t want to limit the conversation to the smuggling of cigarettes alone, because I understand that despite the border closure, the reinforcements are still there. It’s a never say die (situation).

“They’re still attempting to force their way in even at the risk of losing their lives. No matter the measures you put in place, they’re always looking for how they can sneak into the bush and force their way in.

“The border closure with our neighbours will continue until the political leaders of the affected countries come to engage our government to rejig and re-commit themselves to the strict implementation of ECOWAS protocol on transit of goods,” Attah stated.

ALSO READ Part 2 Investigation: Cigarettes Still Flooding to Nigeria Despite de-facto Ban on Imports

This story was produced by The New Diplomat. It was written as part of Wealth of Nations, a media skills development programme run by the Thomson Reuters Foundation in collaboration with the Institute for the Advancement of Journalism. More information at www.wealth-of-nations.org. The content is the sole responsibility of the author and the publisher.

LEAVE A REPLY

Please enter your comment!
Please enter your name here