The Federal Government, through the Nigerian Customs Service (NCS), has embarked on a renewed effort to address the issue of improperly imported private jets in the country.
This initiative which has seen about 80 operators of private jets summoned to present their aircraft import documents at the NCS headquarters in Abuja, aims to ensure compliance with import regulations and to maximize revenue collection from private jet operators who have evaded import duties.
The special aircraft import verification exercise is scheduled to commence on Wednesday June 19,2024 and will continue for 30 days, as stated in a public notice issued by Customs. The notice, which was reviewed by one of our correspondents, highlights the objective of the exercise: “The Nigeria Customs Service announces a verification exercise for privately owned aircraft operating in Nigeria. This exercise aims to identify improperly imported private aircraft without documentation, ensuring proper imports and maximum revenue collection.”
Private jet owners and operators are required to bring several pertinent documents to the verification exercise. These include the aircraft’s Certificate of Registration, the Nigerian Civil Aviation Authority’s (NCAA) Flight Operation Compliance Certificate, the NCAA’s Maintenance Compliance Certificate, the NCAA’s Permit for Non-Commercial Flights, and the Temporary Import Permit (if applicable).
This crackdown on improperly imported private jets follows a hiatus of more than a year since the Federal Government previously suspended similar actions. Over the past three years, the government has sought to recover billions of naira in import duties from private jet operators who have exploited regulatory loopholes to avoid these payments. While a few private jet owners have complied and paid the mandatory import duty, many others have yet to fulfill this obligation.
A common tactic among private aircraft operators in Nigeria is to obtain a Temporary Import Permit (TIP) instead of paying the full import duty. The TIP is initially valid for 12 months and can be extended twice for six months each. However, numerous operators have continuously extended their TIPs indefinitely, circumventing the need to pay the import duty. This practice has led to previous enforcement actions by the Customs Service.
The verification exercise is anticipated to result in the payment of the mandatory import duty by private jet operators. Those who fail to comply may face the grounding of their jets. The TIP has been criticized by some stakeholders as a means of evading the mandatory import duty, which is set at five percent of the value of the private jet.
Given the high cost of private jets, many owners prefer not to pay this duty, opting instead for the TIP under the pretense of temporary entry, citing the International Civil Aviation Organization (ICAO) Convention Article 24, which addresses customs waivers for commercial aircraft operating temporarily in a country.
The new leadership of Customs appears determined to enforce compliance and ensure that all operators pay the requisite import duty. Unconfirmed sources suggest that the government could recover up to N100 billion in unpaid import duties on private aircraft, especially considering the current high exchange rate. This estimate includes a potential 25 percent penalty fee for delayed payments in addition to the statutory five percent import duty.
There is uncertainty about whether private aircraft operators will cooperate with the government to pay the duty. In the past, some operators have taken legal action to prevent the government from collecting the revenue. For example, in 2021, 17 owners of foreign-registered private jets, including prominent business moguls and leading commercial banks, sued the Federal Government to stop the grounding of their planes over alleged import duty defaults. The Federal Government had approved the decision of the Nigeria Customs Service to ground about 91 private jets over alleged refusal to pay import duties amounting to over N30 billion.
The NCS had directed the Nigerian Civil Aviation Authority, the Federal Airports Authority of Nigeria, and the Nigerian Airspace Management Agency to ground the affected private jets immediately. However, issues of inter-agency rivalry and disagreements prevented the implementation of this directive.
The jet owners who sued the government sought a judicial review to determine whether it was lawful for them to pay the controversial import duty on their private jets. They had used foreign shell companies and trustees to purchase their foreign-registered jets, which allowed them to avoid paying higher import duties and insurance premiums.
In a written address supporting the preliminary objection of the first respondent, the court document stated, “The brief facts of this case are that the first respondents, having discovered that some operators of aircraft imported them under the guise of Temporary Importation Permit, were permanently imported into Nigeria and given TIP status to evade payment of lawful customs.” In 2021, the NCS initiated a review of import duties paid on private jets brought into the country since 2006. This review followed the alleged discovery that many private jet owners had used the TIP status to avoid paying the statutory import duty. The then Comptroller General of Customs, Hameed Ali, set up a verification panel to review all TIPs and the relevant aircraft import documents of all private jets in the country.
At the conclusion of the 60-day exercise, 57 private jets, which had licenses for commercial charter operations, were cleared and issued Aircraft Operators Certificates by Customs. However, 29 private jets whose owners participated in the verification were found liable to pay the import duty. Additionally, Customs compiled a list of 62 private jets whose owners failed to appear for the verification exercise but were also found liable for import duty payment. These owners were given a 14-day ultimatum to clear their debts, although the exact number who complied remains unclear.
The extent to which the new Customs management will succeed in compelling powerful private jet owners to pay their import duty is yet to be determined.
