…The current customs duty exchange rate on the Nigeria Customs Service portal is N1578/$. This rate has been changing almost weekly, which is not good for the investment environment.
By Dr Muda Yusuf
MON AUG 19 2024-theGBJournal| The Centre for the Promotion of Private Enterprise (CPPE) is worried that the problem of the prohibitive and unpredictable exchange rate for cargo clearance is yet to be addressed by government.
We believe it is a major policy adjustment that needs to happen to complement current measures to address the current cost-of-living crises in the country.
The high and volatile exchange rate for import duty assessment is fueling the already high inflation, increasing production and operating costs for manufacturers and other businesses, worsening the cost-of-living crisis, putting maritime sector jobs and investments at risk and weakening investors’ confidence.
There is also the added heightened risk of cargo diversion to neighboring countries and smuggling which could jeopardize the realization of customs revenue target.
This situation additionally creates serious competitiveness challenges for ethical and compliant investors in the economy because of their relatively elevated production and operating costs.
In the light of this, the CPPE is reiterating its appeal to the presidency to peg the customs duty exchange rate at N1000/$ 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 gratifying that the Presidential Committee on Fiscal Policy and Tax Reforms had made similar recommendation. The Organized 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 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.
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 determination of 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 government and remove the current avoidable uncertainty around international trade. This is what our peculiar circumstances demands.
It is important to localize and adapt economic policy models to our peculiar circumstances.
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