Nohena Insights · Valuation
Reference value bands and declared value in Nigeria
Customs uses reference value bands as an internal risk tool to flag potential undervaluation, leading to challenges against an importer's declared value based on the actual transaction price.
Nohena · 1 October 2026 · 9 min read
Reference Value Bands vs. Declared Value: Navigating Customs Scrutiny in Nigeria
Navigating customs valuation in Nigeria requires understanding the dynamic between the legally mandated transaction value and the Nigeria Customs Service's internal risk management tools. Customs uses reference value bands as an internal benchmark to flag potentially undervalued goods for scrutiny, which can lead to challenges against an importer's legally declared value based on the actual price paid for the goods.
What are reference value bands?
Reference value bands are internal price databases maintained by customs authorities to establish a range of expected values for specific goods based on historical import data, market surveys, and international price points. They are not a legal method for valuation but function as a primary risk assessment tool for the Nigeria Customs Service (NCS). When a declared value falls significantly below the range established in these databases for a given 10-digit HS heading, it automatically flags the declaration for review, prompting a query and placing the burden of proof on the importer to substantiate their declared value.
These databases are compiled from various sources, including:
Historical data: Analysis of past import declarations for similar or identical goods.
Market intelligence: Information gathered from local market surveys and industry sources.
International price data: Data from global commodity markets and third-party commercial databases.
The goal of these bands is to create a benchmark that helps customs identify declarations that appear to be outliers and may represent a risk of revenue loss through undervaluation. It is a mechanism for directing limited inspection resources toward the highest-risk shipments.
The legal basis for customs valuation in Nigeria
The primary legal basis for customs valuation in Nigeria is the transaction value method, as stipulated by the World Trade Organization (WTO) Valuation Agreement and domesticated into Nigerian law. This agreement, which Nigeria is a signatory to, establishes a fair, uniform, and neutral system for the valuation of imported goods and prioritizes the price actually paid or payable for the goods. The methods must be applied in a strict hierarchical order.
Method 1: Transaction Value. This is the price actually paid or payable for the goods when sold for export to the country of importation, plus certain adjustments for costs like commissions, packing, and royalties as outlined in Article 8 of the WTO agreement. For this method to be used, the sale must meet several conditions, including that the buyer and seller are not related in a way that influenced the price.
Method 2: Transaction Value of Identical Goods. If Method 1 cannot be used, customs will look to the value of identical goods sold for export to the same country at or about the same time.
Method 3: Transaction Value of Similar Goods. If no data on identical goods is available, the value of similar goods is used.
Method 4: Deductive Value Method. This method uses the unit price at which the imported goods are sold in the greatest aggregate quantity on the domestic market, with deductions for post-importation costs like duties, taxes, and profit margins.
Method 5: Computed Value Method. This method calculates the value based on the costs of production of the goods, plus an amount for profit and general expenses.
Method 6: Fall-back Method. If none of the preceding methods can be used, customs may determine the value using reasonable means consistent with the principles of the WTO agreement. This method cannot be based on arbitrary or fictitious values.
The critical point is that customs cannot simply disregard the transaction value (Method 1) and impose a value from their reference database. They must have legitimate reasons to doubt the veracity of the declared value and must follow the prescribed hierarchy to determine a new customs value.
Why customs may challenge your declared value using reference value bands
Customs challenges a declared value when it falls significantly below their internal reference value bands, triggering a suspicion of undervaluation that they are mandated to investigate to protect government revenue. The discrepancy between the declared value and the reference value is not proof of wrongdoing; it is the trigger for a query. The core reasons for this scrutiny are multifaceted.
Common triggers for valuation queries
Revenue protection. The primary function of the NCS is revenue collection. Undervaluation directly reduces the amount collected from import duties, which are calculated as a percentage of the customs value, and from the 7.5% Value Added Tax (VAT) levied on top of that.
Combating capital flight. Deliberate undervaluation, where an importer pays the supplier a higher price offshore while declaring a lower price to customs, is a known mechanism for illicit financial flows. Scrutinizing low values is part of a broader economic security mandate.
Data inconsistencies. A discrepancy between the value declared on the Form M, the Pre-Arrival Assessment Report (PAAR), the commercial invoice, and the final Single Goods Declaration (SGD) is a major red flag for customs officials.
Related-party transactions. If the importer and exporter are related entities (e.g., a subsidiary and parent company), customs will apply greater scrutiny to ensure the relationship did not influence the price to the disadvantage of revenue.
Incorrect HS classification. An attempt to classify goods under a 10-digit HS code with a lower duty rate can sometimes be accompanied by undervaluation to further reduce the tax burden.
How to prepare a defensible declaration
Preparing a defensible declaration involves meticulous documentation that substantiates the transaction value and anticipates the questions that a customs risk engine or officer might have. A declaration built on a foundation of clear, verifiable evidence is the most effective way to navigate potential scrutiny.
Ensure unimpeachable documentation. Your document pack is your primary evidence. It must be complete, consistent, and clear. This includes a detailed commercial invoice, packing list, bill of lading or air waybill, and any relevant permits from agencies like NAFDAC or SON.
Substantiate the customs value (CIF). The dutiable value in Nigeria is based on the Cost, Insurance, and Freight (CIF) Incoterms® rule. You must be able to prove each component: Cost: The price of the goods, evidenced by the commercial invoice and proof of payment.
Insurance: The insurance certificate showing the premium paid. If this is not available, customs will apply a notional value, typically 1.5% of the C&F value, based on statutory provisions.
Freight: The freight invoice from the carrier.
Maintain a robust audit trail. Your ability to defend your declared value depends on the quality of your records. This goes beyond the standard shipping documents. Keep all purchase orders, contracts, and email correspondence with your supplier that discusses pricing, discounts, and terms of sale. If a significant discount was given, be prepared to show why, for example, with evidence that it was for a bulk order or end-of-line clearance.
Provide proof of payment. This is one of the most critical pieces of evidence. A bank transfer confirmation, letter of credit documentation, or other official financial records that match the amount on the commercial invoice provide powerful support for the transaction value.
Leverage decision support. Before lodging a declaration, it is prudent to analyze it from the perspective of a customs risk engine. Using a platform that helps you see potential flags in your declaration before it is sent allows the licensed agent to prepare additional documentation or justifications in advance. Decision support tools help prepare a complete, lodgement-ready document pack that anticipates and addresses potential queries.
Responding to a valuation query
Responding to a valuation query requires promptly providing a comprehensive set of documents and a clear, logical explanation to customs officials justifying the declared transaction value. A query is a request for information, not a final judgment. The objective is to provide the evidence needed for the customs officer to close the query and accept the transaction value.
The licensed agent should prepare a formal response that includes:
A cover letter referencing the query number and summarizing the position.
A reiteration of the facts, explaining that the declared value is the true transaction value as per Method 1 of the WTO Valuation Agreement.
An organized presentation of evidence, including the commercial invoice, proof of payment, purchase order or contract, and any correspondence that explains the price.
A clear explanation for why the price may appear low, if applicable. For example, evidence of a bulk discount, a promotional price, or the goods being from a previous season's stock can be very persuasive.
While reference value bands are a persistent feature of the Nigerian import landscape, they do not override the legal framework for customs valuation. By understanding why they are used and proactively building a defensible case for your transaction value, importers and their agents can navigate customs scrutiny effectively. The most resilient strategy is one of diligent preparation and transparent documentation. For further reading on import compliance topics, please see our other articles in our insights section .
Nohena prepares; the licensed agent lodges.
FAQ
Is using a reference value to determine customs duty legal in Nigeria?
No, the primary legal method for valuation is the transaction value, as prescribed by the WTO Valuation Agreement. Reference values are internal risk assessment tools used by the Nigeria Customs Service to flag declarations for further review. They are not a legal basis for assessing duty but a trigger for a query.
What happens if I cannot prove my transaction value?
If the customs service formally rejects your declared transaction value because of insufficient evidence, they are required to move sequentially through the other five WTO-approved valuation methods (e.g., value of identical goods, similar goods, deductive method) to determine the correct customs value for your shipment.
Can I be penalized for my declared value being lower than the reference value?
You cannot be penalized simply for having a declared value that is lower than a reference value. A penalty, which can be severe, would only be applied if a subsequent investigation concludes that you deliberately and fraudulently undervalued your goods with the intent to evade duties, which is a customs offense.
Does the PAAR value guarantee acceptance by customs?
A Pre-Arrival Assessment Report (PAAR) provides an important, indicative opinion on the classification and valuation of goods before they arrive. However, the final assessment is made by the customs officer at the port of clearance. That officer retains the authority to query the declaration if they have reason to doubt the value, even if it matches the PAAR.