The Centre for the Promotionof Private Enterprise [CPPE] is worried that the problem of the prohibitive andunpredictable exchange rate for cargo clearance is yet to be addressed bygovernment. We believe it is a majorpolicy adjustment that needs to happen to complement current measures to addressthe current cost-of-living crises in the country.
The high and volatile exchangerate for import duty assessment is fueling the already high inflation,increasing production and operating costs for manufacturers and other businesses,worsening the cost-of-living crisis, putting maritime sector jobs andinvestments at risk and weakening investors’ confidence. There is also the added heightened risk ofcargo diversion to neighboring countries and smuggling which could jeopardizethe realization of customs revenue target. This situation additionally creates serious competitiveness challengesfor ethical and compliant investors in the economy because of their relatively elevatedproduction and operating costs.
In the light of this, theCPPE is reiterating its appeal to the presidency to peg the customs dutyexchange rate at N1000/$ for the next six months in the first instance throughan Executive Order. This resonates withthe current federal government’s commitment to alleviating the currenthardships on the citizens and the burden on businesses. It gratifying that the Presidential Committeeon Fiscal Policy and Tax Reforms had made similar recommendation. The Organizedprivate Sector [OPS] had also strongly advocated in the same vein. The current customs duty exchange rate on theNigeria Customs Service portal is N1578/$. This rate has been changing almost weekly, which is not good for theinvestment environment.
It is important to clarifythat this proposition is without prejudice to the ongoing foreign exchange reformsof the present administration. Contraryto concerns expressed in some quarters, the adoption of lower exchange rate forcomputation of customs duty would not undermine the current foreign exchangereforms. It is not a request for a concessionary exchange rate for forexallocation.
We are dealing with twoseparate issues here. One is about foreign exchange policy, the other is purelya trade policy matter. Theresponsibility of the CBN should end at the point of opening of Form M forimporters within the context of extant foreign exchange policy. All other matters relating to internationaltrade should be within the remit of the Federal Ministry of Finance and the FederalMinistry of Trade and Investment. Theseare the institutions statutorily responsible for trade policy issues. The determination of the customs dutyexchange rate by the CBN is an intrusion into trade policy space which needs tobe urgently corrected.
Meanwhile, in order topermanently address this matter, it might be necessary to amend the Customs Actto move the responsibility of determination of applicable exchange rate forimport duty payment to the fiscal authorities. This is necessary to bring such rates in alignment with the extant tradepolicy direction of government and remove the current avoidable uncertainty aroundinternational trade. This is what our peculiar circumstances demands. It is important to localize and adapteconomic policy models to our peculiar circumstances.
DR MUDA YUSUF
DIRECTOR/CEO
CENTRE FOR THE PROMOTION OFPRIVATE ENTERPRISE [CPPE]
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