Volatile exchange rate for import duties drives high inflation – CPPE – The Sun Nigeria

By Steve Agbota

The Center for the Promotion of Private Enterprise (CPPE) has expressed concern over the high and volatile exchange rate used to calculate import duties, which is fueling already high inflation and increasing production and operating costs for manufacturers and other companies in the country.
According to CPPE, the situation is also exacerbating the cost of living crisis, jeopardising jobs and investments in the maritime sector and weakening investor confidence.
In a statement released on Sunday, CPPE Director and CEO Muda Yusuf expressed concern that the issue of the prohibitive and unpredictable exchange rate for cargo handling has not yet been resolved by the government.
In addition, there is an increased risk of cargo diversion to neighbouring countries and smuggling, which could jeopardise the achievement of customs revenue targets.
“We believe that a comprehensive policy reorientation is needed to complement current measures to address the current cost of living crisis in the country.
“This situation poses additional serious challenges to ethical and compliant investors in the economy in terms of their competitiveness, as their production and operating costs are relatively high,” he said.
Against this background, the CPPE renews its appeal to the President to initially fix the tariff rate at 1,000 naira per dollar for the next six months through an Executive Order.
“This is in line with the current federal government's commitment to alleviate the current hardships for citizens and the burdens on businesses. It is gratifying that the Presidential Committee on Fiscal Policy and Tax Reforms has made a similar recommendation. The organized private sector [OPS] had also spoken out strongly in favor of the same thing.
“The current customs exchange rate on the Nigeria Customs Service portal is N1578/$. This rate changes almost weekly, which is not good for the investment environment. It is important to clarify that this proposal is without prejudice to the ongoing foreign exchange reforms of the present administration,” he said.
Contrary to some concerns, he said the introduction of a lower exchange rate for calculating customs duties would not undermine current foreign exchange reforms, adding that it was not a call for a reduced exchange rate for foreign exchange allocation.
“We are dealing with two different issues here. One is about foreign exchange policy and the other is purely a trade policy issue. The CBN's responsibility should end with the opening of Form M to importers under the existing foreign exchange policy.
“All other matters relating to international trade should fall under the jurisdiction of the Federal Ministry of Finance and the Federal Ministry of Trade and Investment. These institutions are legally responsible for trade policy issues. The setting of the tariff exchange rate by the CBN is an intervention in the trade policy space that urgently needs to be corrected.
“In the meantime, to resolve this issue permanently, it may be necessary to amend the Customs Act and transfer responsibility for setting the applicable exchange rate for payment of import duties to the tax authorities. This is necessary to align these rates with the government's existing trade policy and to remove the current avoidable uncertainty in international trade. This is what our particular circumstances require. It is important to localise economic policy models and adapt them to our particular circumstances,” he explained.

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