Nigeria’s wobbly customs duty exchange rate raises concerns

The frequent changes in the customs duty exchange rate in Nigeria have become a huge burden on the business community, the Centre for the Promotion of Private Enterprise (CPPE) has said.

The CPPE said 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,” Muda Yusuf, CEO of the centre, said in a statement on Wednesday.

The customs duty exchange rate has changed more than 35 times this year, according to CPPE.

It said the rate jumped to N1,373.65/$ on Wednesday from less than N1,200/$ 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,” Yusuf said.

He said investment risk has become elevated, planning has become difficult, risk management has become challenging and investors’ confidence has been weakened.

“It is double whammy for investors to grapple with volatility in the foreign exchange market and contend, concurrently, with high level of unpredictability in the international trade ecosystem. This is not consistent with our growth aspirations at this time.”

The CPPE urged the Central Bank of Nigeria to adopt a framework to minimise volatility in the customs duty exchange rate in line with the commitment of the present administration to bolster investors’ confidence and drive economic growth. 

It said such a framework should adopt a quarterly customs duty exchange rate, after due consultation with the fiscal authorities.

“We propose a commencement rate of N1,000/$ 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,” it added.