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CBN Raises Import Duty FX Amid Naira Depreciation

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As the Naira continues its downward trend in the Nigerian Autonomous Foreign Exchange Market (NAFEM) against major currencies, particularly the US dollar, the Central Bank of Nigeria (CBN) has increased the exchange rate for calculating import duty at the nation’s seaports to N1,502/$1.

Data from the Nigeria Customs Service (NCS) online trade portal, Nigeria Trade Hub, shows that this represents a 3.1 percent increase, or N24, from the previous rate of N1,457.014/$1 recorded on Tuesday.

Financial analysts note that importers opening Form M on Wednesday will now need more funds to pay import duties compared to those who opened Form M on Tuesday, due to the lower exchange rate for cargo clearing at that time.

This fluctuation has reignited calls from stakeholders to benchmark the Customs exchange rate for better predictability. Dr. Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), highlighted that the frequent changes in the customs duty exchange rate have become a significant burden on the business community.

Yusuf stated that the fluctuating exchange rate has caused high volatility in cargo clearing costs, exacerbated inflationary pressures, and increased investment risks, particularly in the real sector of the economy. “These frequent changes are profoundly detrimental to production, planning, and other real sector activities in the Nigerian economy,” he said.

He noted that in the first quarter of this year alone, there were twenty-eight changes in the customs duty exchange rate. By April, the frequency of changes had approached ten times or more. As of May 1, 2024, the rate had surged to N1,373.65 per dollar, from less than N1,200 per dollar just days before.

“It is extremely difficult for investors to plan under these unstable circumstances. The situation has introduced an unprecedented level of uncertainty and unpredictability to international trade dynamics. Investment risk has become elevated, planning has become difficult, risk management has become challenging, and investors’ confidence is being weakened,” Yusuf explained.

He emphasized that investors are now facing a double challenge: volatility in the foreign exchange market and high levels of unpredictability in the international trade ecosystem. “This is not consistent with our growth aspirations at this time,” he added.

Yusuf proposed that the framework should adopt a quarterly customs duty exchange rate, set after due consultation with fiscal authorities. “We propose a commencement rate of N1,000 per dollar for the customs duty exchange rate,” he suggested.

“Consultation with fiscal authorities is imperative because of the trade policy implications of such decisions. It is also consistent with the commitment of the present administration to effective coordination between fiscal and monetary authorities,” Yusuf concluded.

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