The Center for Promotion of Private Enterprises (CPPE) and an expert in the maritime industry, Dr Eugene Nweke have bemoaned the volatility and yoyo movement of the Customs duty exchange rates, saying it’s hurting the economy.
This development follows the recent increase of the foreign exchange (FX) rate for import duties to N1,373.64 per dollar by the Nigeria Customs Service (NCS).
This represents a 19.4 percent increase compared to N1,150.1/$ displayed on April 24.
Reacting to the constant changes in the exchange rates, Dr Muda Yusuf, the Chief Executive Officer of CPPE appealed to the Central Bank of Nigeria (CBN) to adopt a framework to minimize volatility in the customs duty exchange rate in line with the commitment of the present administration to bolster investors’ confidence and drive economic growth.
He argued that such a framework should adopt a quarterly customs duty exchange rate, after due consultation with the fiscal authorities.
“The frequent changes in the customs duty exchange rate have become a huge burden on the business community. This has led to high volatility in cargo clearing costs, worsening inflationary pressures and aggravating investment risk, especially 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 disclosed.
Giving a breakdown of the constant changes in the exchange rate, Yusuf disclosed that in the first quarter of this year, there were changes in the customs duty exchange rate twenty-eight times.
He lamented that in April alone, the frequency of changes would be close to ten times or even more.
“As at 1st May 2024, the rate has jumped to N1373.65/$. It was less than N1200/$ a few 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 the international trade dynamics. Investment risk has become elevated, planning has become difficult, risk management has become challenging and investors’ confidence is being weakened.
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It is double whammy for investors to grapple with volatility in the foreign exchange market and contend, concurrently, with a high level of unpredictability in the international trade ecosystem. This is not consistent with our growth aspirations at this time” he disclosed.
He called on the government to adopt N1000/$1 as the custom’s duty exchange rate to boost investor’s confidence.
“The Centre for the Promotion of Private Enterprise [CPPE] appeals to the CBN to adopt a framework to minimize volatility in the customs duty exchange rate in line with the commitment of the present administration to bolster investors’ confidence and drive economic growth.
We propose a commencement rate of N1000/$ customs duty exchange rate. Consultation with the 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” he said.
Earlier, Dr Nweke, a seasoned maritime expert and former President of the National Association Of Government Approved Freight Forwarders (NAGAFF) lamented that the CBN resorting into easy fix applications by using customs platform as quasi exchange market portal, is to say the least, an open misapplication by a monetary policy essence by a regulator who rather thinks a straightjacket approach as opposed to encourage a sustainable fixed exchange rate for trade valuation.
He noted that while they are not against the efforts of the government towards stabilizing the naira, and the noticeable gains made so far, the impact and reality of such gains remains its major concern.
In a statement titled RE: CBN Policy On Import Duty A, Professional Expression made available to The Matrix, Nweke advised that such efforts should be deliberately and evenly integrated without killing or hampering trading activities in the country.
“How do one reconcile the fact that in the parallel (black) market, mallams are selling and buying dollars at a particular rate, meanwhile, the official exchange rate on the customs portal for payable import duty calculation is higher.
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The implications are that, while it is assumed that the naira is gradually gaining supremacy over the dollar, the reality is that, such gains does not reflect in the prices of products in the market because, the imports value and clearing cost out of the port exacerbate (promote) inflation, while other factors that promotes capital flight in the supply chain are still even.
When you take a closer look at some African ports, many are reducing cargo handling charges in response to this directive. It can’t be the same here, for the reasons which all of us know, which is, the foreign exchange rate is affecting the cost of terminal operational and berth production capacity, which the operators have to grapple with on a daily basis.
So, all we are appealing to the government is to tailor a responsive monetary policy in a manner that doesn’t suffocate an industry, and this is doable” he added.
Backing Yusuf’s appeal for a fixed exchange rate, Nweke disclosed that the idea behind the UCP -600 (Uniform Customs and Practice for Documentary Credit) is to enable customs administration to sustain a fixed exchange rate to support trading activities and protect it from undue incidences of forex fluctuations.
He bemoaned the failure of policymakers to carry freight forwarders in both fiscal and monetary policy formulations.
“We have made cases for the freight forwarders inputs to be sought during fiscal and monetary policies formulations, but often we are treated as inconsequential by the know-it-all policy makers in the past, but, deep down, we know too well that our inputs count.
So, to say the least, we believe that we can collectively do and indeed manage the policy process better, as such we urge authorities to come down from the high pedestals and discuss trade policies in practical terms and not in parenthesis” he advised.
