‘Increase In Import Duty Forex Rate Will Hurt Businesses’

The chief executive officer (CEO) of Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf said the recent decision by the Central Bank of Nigeria (CBN) to increase the customs exchange rate from N783 to N952 per dollar would worsen the already prohibitive production and operating costs for businesses in the country.

Yusuf said: “it would also inflict more pains on the citizens, erode profit margins, reduce purchasing power and put the survival of businesses at an elevated risk. The frequent changes in rates are also creating serious issues of uncertainty for investors and making the international trade process increasingly unpredictable.”

According to him, the Central Bank of Nigeria (CBN) had on June 24, 2023, adjusted the exchange rate from N422.30 per dollar to N589 per dollar. On July 6, it was re-adjusted to N770.88 per dollar, and again on November 14, it was re-adjusted to N783.174 per dollar, and now reviewed to N951.941 per dollar.

He explained that “already businesses are contending with an incredibly difficult operating environment arising from severe macroeconomic headwinds. The persistent currency depreciation is making access to intermediate products very difficult for manufacturers, energy cost remains very high, purchasing power is weak, investors’ confidence is declining and consumer confidence is on the downward trend.

“This is not a good time for the CBN to increase the exchange rate for the computation of import duty and the clearing of cargo by importers. This review will impact the cost of all imports, including raw materials for manufacturers, pharmaceutical products, machineries, energy products, petroleum products and many more.

This will make a bad situation worse for investors in the economy. It will worsen the misery of the citizens amid an excruciating inflationary condition.”

The CPPE appealed to the CBN and the Coordinating Minister of the Economy to review the increase, saying “trade policy measures should not be subjected to the full vagaries of the philosophy of market forces. The CBN should allow for a concessionary rate for the computation of import duty to protect the economy and the citizens from the reality of unbearable inflationary pressures.”

The Association proposed that going forward, CBN should fix the customs duty rate at 20 per cent less than the official exchange rate in the light of the prevailing harsh economic conditions.

He added that the recent review will make the cost of importation through official channels even more prohibitive and this may result in greater incentives for smuggling; more industries that are dependent on the imported raw materials may shut down; customs revenue may decline as imports through official channels become difficult; and worsening an already bad inflation situation.

CPPE emphasised that the CBN should review its decision to increase the exchange rate for customs duty computation, saying that the frequency of rate reviews should also be reduced to minimise uncertainty and risk for investors.