The Centre for the Promotion of Private Enterprise (CPPE) has expressed deep concern over the unresolved issue of the prohibitive and unpredictable exchange rate applied for cargo clearance in Nigeria. This situation, if left unaddressed, poses a significant threat to the country’s economic stability and exacerbates the ongoing cost-of-living crisis.
In a statement signed by the Director-General, Dr Muda Yusuf, the current high and volatile exchange rate used for import duty assessment is driving inflation, increasing production and operating costs for manufacturers and businesses, and worsening the cost-of-living crisis for ordinary Nigerians. Additionally, this instability threatens jobs and investments in the maritime sector and undermines investor confidence. The unpredictability of the exchange rate also raises the risk of cargo diversion to neighboring countries and smuggling, which could jeopardize the realization of customs revenue targets. Ethical and compliant investors are particularly disadvantaged, facing elevated production and operating costs that impair their competitiveness.
In light of these challenges, the CPPE is reiterating its call to the presidency to implement an immediate policy adjustment. We strongly advocate for the pegging of the customs duty exchange rate at N1000/$ for the next six months through an Executive Order. This measure aligns with the current federal government’s commitment to alleviating the hardships faced by citizens and businesses. It is noteworthy that the Presidential Committee on Fiscal Policy and Tax Reforms has made a similar recommendation, and the Organized Private Sector (OPS) has voiced strong support for this initiative. Currently, the customs duty exchange rate on the Nigeria Customs Service portal stands at N1578/$, with frequent fluctuations that create uncertainty and instability in the investment environment.
To clarify, this proposal does not conflict with the ongoing foreign exchange reforms of the present administration. The adoption of a lower exchange rate for customs duty calculation will not undermine the broader foreign exchange policy. This is not a request for a concessionary exchange rate for forex allocation; rather, it is a trade policy matter distinct from foreign exchange policy. The Central Bank of Nigeria’s (CBN) role should be limited to the opening of Form M for importers within the context of existing foreign exchange policies. All other matters related to international trade should fall under the purview of the Federal Ministry of Finance and the Federal Ministry of Trade and Investment, the institutions statutorily responsible for trade policy. The current involvement of the CBN in determining the customs duty exchange rate represents an unwarranted intrusion into trade policy, which needs to be urgently addressed.
To permanently resolve this issue, CPPE suggests amending the Customs Act to transfer the responsibility for determining the applicable exchange rate for import duty payments to the fiscal authorities. This change is necessary to align exchange rates with the government’s trade policy direction and to eliminate the current uncertainty surrounding international trade. It is crucial to adapt economic policies to Nigeria’s unique circumstances to ensure sustainable economic growth.
