Customs Forex Duty Rate Drops By 1.5% As Naira Strengthens

For the second time in seven days, the Central Bank of Nigeria (CBN) has slashed the exchange rate for computing Customs duties at the nation’s seaports and airports from N1,617.96/$1 to N1,593.41/$1 representing 1.5 per cent reduction.

The slash, analysts argued, was as a result of the naira that strengthened against the dollar at the official window, over the weekend.

According to data on the federal government Single Window for Trade, the exchange rate for clearance of cargoes at the seaports, on Monday, is currently N1,593.41/$1 against N1617.96/$1, it was over the weekend.

This showed that the Customs exchange rate was reduced by N24.55.

To this end, importers that opened Form M today will pay less to clear their cargoes as import duties are benchmarked against the dollar.

Also, importers will open Form M at a lower rate compared to those who opened Form M on Monday, 18th March, 2024 according to the apex bank’s new directive to Customs to use the rate on the date of submitting Form M for calculating import duties.

However the Centre for the Promotion of Private Enterprise(CPPE) had last month appealed to the Central Bank of Nigeria (CBN) to peg the customs duty exchange rate at N1,000 per dollar for the rest of the year in line with the federal government’s commitment to ease the current hardships on the citizens and the burden on businesses.

The chief executive officer(CEO) of CPPE, Dr Muda Yusuf, who  stated this in a press release sent to LEADERSHIP,  said: “the Chamber welcomes the decision of the CBN to approve the use of the exchange rate reflected on the import documentation (Form M) at the onset of import transaction.

“This was a laudable response to the grievances of investors in the economy. This would reduce the current uncertainty around imports and related transactions in the economy.”

Dr. Yusuf noted that, the CBN intervention did not address the bigger and the more troubling issue of the current prohibitive cost of cargo clearance at the ports which had risen by over 40 per cent in the last two months, saying, the high exchange rate for import duty assessment is fueling the already high inflation, increasing production and operating costs for manufacturers and other businesses, worsening the cost-of-living crisis and putting thousands of maritime sector jobs at risk.

He added that there is also the added risk of cargo diversion to neighbouring countries and heightened smuggling which could jeopardise the realisation of customs revenue targets.

In the light of this, Yusuf said: “the CPPE strongly appeals to the CBN to peg the customs duty exchange rate at N1000 per dollar for the rest of the year. The current customs duty exchange rate of N1488.9 per dollar is still too high in the context of the current galloping inflation and difficulties facing businesses and the citizens.

“Instances of abandoned cargo are on the increase as a consequence of escalating trade costs.  These are not good outcomes for an economy seeking to ensure recovery, drive growth, promote inclusion and guarantee social stability.

“Businesses are currently grappling with multiple macroeconomic and structural headwinds which are negatively impacting profitability, competitiveness, job creation, retention of existing jobs and business sustainability.”

According to Yusuf, pegging the customs duty exchange rate resonates with the present intervention measures to mitigate the current hardships in the country.  Besides, this proposition does not in any way detract from the economic reform agenda of the present administration.

“If anything, it would complement the economic transformation measures because of the expected positive impact on competitiveness, productivity, cost reduction, deceleration of inflation and employment generation,” he added.

Last week, the naira gained 0.95 percent as the dollar was quoted at N1,602.75 on Friday, March 15, stronger than N1,617.96 quoted earlier on Monday, March 11, the beginning of the trading week, at the official FX market, according to the data compiled from the FMDQ Securities Exchange.