…LCCI, CPPE, CBN proffer solutions
Amid the persistent hike in exchange rate for Customs duty which has increased by over 55% percent since December 2023, Nigerian economic experts have warned that there will be significant decline in imports and abandonment of cargoes at seaports, if the menace continues.
The uncertainty sparked by the frequent Customs changes has left port users in a quagmire while several importers and their freight agents will reportedly jettison their consignments at ports or resort to selling the imported products at inflated prices to cover the additional costs.
Worried by this challenge and consequent inflation, the Association of Nigeria Licensed Customs Agents (ANLCA) has vowed to galvanize port workers and the Nigeria Labour Congress (NLC) in a protest that will shutdown seaports nationwide.
Speaking with our correspondent, the Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, maintained that Customs duty fluctuations will lead to lower imports and jettisoning of cargoes at the ports.
Yusuf’s words: “What is happening with this exchange rate volatility and persistent review is that it is making life even more difficult for not just port users, but also fueling inflation.”
“Nigerian citizens were already grappling with the problem of the fuel price, energy cost, cost of transportation, then the unification of the exchange rate, all these things are enough burden.”
“The frequent changes keep creating a lot of uncertainty for people who are in business. People can no longer plan, they don’t know what the landing cost will be, what the cost of planning cargo clearance will be, and it is not good for business. It is also increasing the cost of production and operations, thus, leading to inflation.”
According to him, these developments means the volume of trade will keep dropping, adding that; “it will affect the freight agents and the government as well. Where will they get the Customs duty from if the volume of cargo throughput keeps decreasing? The government should look into this. We have to reduce trade costs. We have heard it from the Director-General of the World Trade Organisation (WTO), Dr. Ngozi Okonjo-Iweala several times, as she lamented that trade costs in Nigeria is too high.”
He, however, advised the federal government to peg the exchange rate for Customs duty at N800/$ and give a minimum of 90 days notice if the rates must be changed.
On his part, the President of Lagos Chamber of Commerce Industry (LCCI), Mr. Gabriel Idahosa, told News Diet magazine that the Customs duty hike is killing several industries.
“With the very frequent increase in the Customs duty rates, importers and manufacturers can no longer afford to import or produce and still make profit. It is certainly killing a number of industries.”
“The solutions lie in going back to the primary problem which is the exchange rate and finding out how the nation can increase the supply of foreign currency into the economy to make the naira stronger,” the LCCI President said.
He lamented that Nigeria has millions of importers but very few exporters, stressing that the prevalent fiscal challenges should force many Nigerians to go into export businessbusiness for goods, services and manpower.
“In the ICT space, there are lots of opportunities for Nigerians to work and earn hard currency without leaving the nation. There are also numerous Nigerian products that are ready for exports. These are medium and long term solutions to the forex challenges. Nigeria has built a reputation in the world as the biggest importers, it is time to change that narrative to the biggest exporters,” the LCCI boss remarked.
Noting the concerns of importers following the liberalization of the FX market on Willing Buyer-Willing Seller trading principle, the Central Bank of Nigeria (CBN) recently advised Nigeria Custom Service and other related parties adopt the closing FX rate on the date of opening Form M for the importation of goods, as the FX rate to be used for Import Duty Assessment.
The apex bank stated that this rate remains valid until the date of termination of the importation and clearance of goods by importers, even as it expressed regret at the uncertainties around the pricing structure of goods and services in the economy and creating abnormal increases in the final sale prices of items and inflation.
In a statement signed by CBN’s Director of Trade and Exvhange department, Dr. Hassan Mahmud, the central bank opined that the new strategy would enable Customs and importers to plan appropriately and reduce the uncertainties around varying daily exchange rate in determining their revenue or cost structure, respectively.
“Effective 26th February 2024, the closing rate on the date of opening of Form M for the importation of goods and services would be the rates that would apply for the assessment of import duty. This supersedes the requirements of Memorandum 9, J (2) of the Central Bank of Nigeria Foreign Exchange Manual. (Revised Edition), 2018.”
“While the CBN is mindful of the initial volatility and price distortions in the aftermath of the FX market liberalization, the Bank is confident that these reforms, would in the medium term, ensure stability in the market and entrench market confidence necessary to attract investment capital for the growth and development of the Nigerian economy,” the statement read.