The Centre for the Promotion of Private Enterprise (CPPE), has urged the federal government to peg the exchange rate for computing Customs import duty at the nation’s seaports to N1,000/$1 as it fuelling diversion of cargoes to neighbouring seaports and massive smuggling through the land borders.
The Centre in a statement by its director, Dr Muda Yusuf, said cargo diversion to neighbouring countries and smuggling would jeopardise the realisation of Customs revenue target.
LEADERSHIP reports that the exchange rate for importation currently stands at N1578/$1 as stakeholders have attributed the recent drop in the Importation of cargoes into the nation’s seaport to the non stability of the Central Bank of Nigeria (CBN).
The former director general of Lagos Chamber of Commerce and Industry (LCCI), however, appealed to President Bola Tinubu to peg Customs duty exchange rate at N1000/$1 for the next six months in the first instance through an Executive Order.
Dr Yusuf, said the high and volatile exchange rate for import duty assessment is fueling the already high inflation, increasing production and operating costs for manufacturers and other businesses.
He stated that the volatile exchange rate would worsen the cost-of-living crisis, putting maritime sector jobs and investments at risk and weakening investors’ confidence.
“CPPE is worried that the problem of the prohibitive and unpredictable exchange rate for cargo clearance is yet to be addressed by the government. We believe it is a major policy adjustment that needs to happen to complement current measures to address the current cost-of-living crises in the country. The high and volatile exchange rate for import duty assessment is fueling the already high inflation, increasing production and operating costs for manufacturers and other businesses, worsening the cost-of-living crisis, putting maritime sector jobs and investments at risk and weakening investors’ confidence.
“There is also the added heightened risk of cargo diversion to neighbouring countries and smuggling which could jeopardise the realisation of customs revenue targets. This situation additionally creates serious competitiveness challenges for ethical and compliant investors in the economy because of their relatively elevated production and operating costs.
“In the light of this, the CPPE is reiterating its appeal to the presidency to peg the customs duty exchange rate at N1000/$ for the next six months in the first instance through an Executive Order. This resonates with the current federal government’s commitment to alleviating the current hardships on the citizens and the burden on businesses.
“It is gratifying that the Presidential Committee on Fiscal Policy and Tax Reforms has made similar recommendations. The Organised private Sector (OPS) had also strongly advocated in the same vein. The current customs duty exchange rate on the Nigeria Customs Service portal is N1578/$. This rate has been changing almost weekly, which is not good for the investment environment.
It is important to clarify that this proposition is without prejudice to the ongoing foreign exchange reforms of the present administration.
“Contrary to concerns expressed in some quarters, the adoption of a lower exchange rate for computation of customs duty would not undermine the current foreign exchange reforms. It is not a request for a concessionary exchange rate for forex allocation.”
Yusuf, however, stated that matters relating to international trade should be within the remit of the Federal Ministry of Finance and the Federal Ministry of Trade and Investment and not the CBN.
“We are dealing with two separate issues here. One is about foreign exchange policy, the other is purely a trade policy matter. The responsibility of the CBN should end at the point of opening of Form M for importers within the context of extant foreign exchange policy. All other matters relating to international trade should be within the remit of the Federal Ministry of Finance and the Federal Ministry of Trade and Investment.
“These are the institutions statutorily responsible for trade policy issues. The determination of the customs duty exchange rate by the CBN is an intrusion into trade policy space which needs to be urgently corrected.”
“Meanwhile, in order to permanently address this matter, it might be necessary to amend the Customs Act to move the responsibility of determining the applicable exchange rate for import duty payment to the fiscal authorities. This is necessary to bring such rates in alignment with the extant trade policy direction of the government and remove the current avoidable uncertainty around international trade.
“This is what our peculiar circumstances demand. It is important to localise and adapt economic policy models to our peculiar circumstances.”
