Following the adjustment of the exchange rate for importation more than six times this year, the Central Bank of Nigeria (CBN) has directed that the rate to be used by the Nigerian Customs should be what is quoted on the Form M of importers.
Form M is a key requirement for initiating the importation process and is used by importers or their authorised representatives to provide necessary information to the bank for processing. The volatility of the exchange rate, according to analysts and importers, have contributed to the rising cost of living in the country where inflation is in the borders of 30 per cent
This is as the Centre for the Promotion of Private Enterprise(CPPE) has appealed to the Central Bank of Nigeria (CBN) to peg the customs duty exchange rate at N1,000 per dollar for the rest of the year in line with the federal government’s commitment to ease the current hardships on the citizens and the burden on businesses.
The chief executive officer(CEO) of CPPE, Dr Muda Yusuf, who stated this in a press release sent to LEADERSHIP, said: “the Chamber welcomes the decision of the CBN to approve the use of the exchange rate reflected on the import documentation (Form M) at the onset of import transaction.
“This was a laudable response to the grievances of investors in the economy. This would reduce the current uncertainty around imports and related transactions in the economy.”
The CBN, in a circular issued by the director, Trade and Exchange Department, Dr Hassan Mahmud, to the Nigerian Customs Service and the general public, said, it noted the concerns of importers of goods and services n the irregular changes in the Import Duty Assessment levies applied by the NCS.
According to the apex bank, the uncertainty of the forex rate had “further built uncertainties around the pricing structure of goods and services in the economy and created abnormal increases in the final sale prices of items, which is largely driven by uncertainties, rather than traditional market fundamentals, with implications to near term inflation trends.
“To this effect, the CBN wishes to advise that the Nigeria Custom Service and other related Parties adopt the closing forex rate on the date of opening Form M for the importation of goods. as the forex rate to be used for import Duty Assessment This rate remains valid until the date of termination of the importation and clearance of goods by importers.
“This would enable the Nigeria Custom Service and the importers to effectively plan appropriately and reduce the uncertainties around varying daily exchange rate in determining their revenue or cost structure, respectively.
“Therefore, effective 26th February 2024, the closing rate on the date of opening of Form M for the importation of goods and services would be the rates that would apply for the assessment of import duty. This supersedes the requirements of Memorandum 9, J (2) of the Central Bank of Nigeria Foreign Exchange Manual. (Revised Edition), 2018.
“While the CBN is mindful of the initial volatility and price distortions in the aftermath of the forex market liberalisation, the Bank is confident that these reforms, would in the medium term, ensure stability in the market and entrench market confidence necessary to attract investment capital for the growth and development of the Nigerian economy.”
Commenting, Dr. Yusuf noted that, the CBN intervention did not address the bigger and the more troubling issue of the current prohibitive cost of cargo clearance at the ports which had risen by over 40 per cent in the last two months, saying, the high exchange rate 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 and putting thousands of maritime sector jobs at risk.
He added that there is also the added risk of cargo diversion to neighbouring countries and heightened smuggling which could jeopardise the realisation of customs revenue targets.
In the light of this, Yusuf said: “the CPPE strongly appeals to the CBN to peg the customs duty exchange rate at N1000 per dollar for the rest of the year. The current customs duty exchange rate of N1488.9 per dollar is still too high in the context of the current galloping inflation and difficulties facing businesses and the citizens.
“Instances of abandoned cargo are on the increase as a consequence of escalating trade costs. These are not good outcomes for an economy seeking to ensure recovery, drive growth, promote inclusion and guarantee social stability.
“Businesses are currently grappling with multiple macroeconomic and structural headwinds which are negatively impacting profitability, competitiveness, job creation, retention of existing jobs and business sustainability.”
According to Yusuf, pegging the customs duty exchange rate resonates with the present intervention measures to mitigate the current hardships in the country. Besides, this proposition does not in any way detract from the economic reform agenda of the present administration.
“If anything, it would complement the economic transformation measures because of the expected positive impact on competitiveness, productivity, cost reduction, deceleration of inflation and employment generation,” he added.
