In the wake of economic uncertainties, the Central Bank of Nigeria (CBN) has raised Customs exchange rates twice within 24 hours, sparking vehement opposition from importers and Customs agents.
The initial increase from N952 to N1,356.883 per dollar on Friday was followed by another hike to N1,413.62. This move, amounting to a 43 percent rise, has drawn sharp criticism, particularly from Dr. Muda Yusuf, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE).
Dr. Yusuf expressed the severity of the situation, stating, “The drastic upward review of the exchange rate for the computation of import duty from N952 to N1,413.62 would have a negative effect on businesses across all sectors. This is a whopping 42.5% increase. This is like the last straw.”
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His sentiments capture the gravity of the impact on businesses that are already grappling with the aftermath of recent currency devaluation and unification.
The CEO of CPPE emphasized that businesses, especially those in the real sector, are still reeling from the shocks of the recent unification of the exchange rate, which has driven the official rate to about N1400. The 42.5% increase in import duty rates is poised to exacerbate the challenges faced by businesses, leading to escalated production and operating costs.
One of the major concerns raised is the potential fueling of inflation as a result of these policy actions. Dr. Yusuf pointed out, “This action will further fuel inflation as production and operating costs get escalated. The vulnerable segments of the population will be further impoverished as cost-push inflation gets exacerbated.”
The socio-economic ramifications of such inflationary pressures are substantial, posing a threat to the well-being of the population at large.
The CPPE, recognizing the severity of the situation, appealed to the CBN to reverse the rate hike in consideration of the already impoverished segments of society and the numerous businesses teetering on the verge of collapse.
The recommendation to treat the determination of the exchange rate for import duty computation as a fiscal policy matter, falling within the remit of the finance ministry, reflects the urgency of realigning such policies with broader fiscal considerations.
Amidst these developments, there are speculations that the CBN is not done with its adjustments to the Customs exchange rate. Alhaji Tanko Ibrahim, the National Coordinator of the National Association of Government Approved Freight Forwarders (NAGAFF), said, “I heard from the grapevine that the CBN plans to push the Customs exchange rate to as high as N1,500 per dollar. That is their target, and they are going to do it soon.”
This speculation raises further concerns among stakeholders about the sustainability of the import business and the ability of the Nigeria Customs Service to meet its revenue targets for 2024.
The series of rate hikes has triggered a wave of concern among stakeholders, who view the government’s actions as insensitive. An angry stakeholder lamented, “The whole situation has given away this government as insensitive to the plight of Nigerians. While we are still discussing the implications of Friday’s increase and how it is going to impact the lives of ordinary Nigerians, this government went ahead to slam yet another increase.”
This sentiment reflects a growing disillusionment with the government’s economic policies and a perception of cruelty and insensitivity.
The recent spikes in Customs exchange rates in Nigeria have set off a chain reaction of economic concerns and discontent among stakeholders. The immediate repercussions on inflation, production costs, and the overall business environment underscore the need for a more nuanced and carefully considered approach to economic policies.
The call for a reversal of the rate hike and the suggestion to involve fiscal authorities in determining exchange rates for import duty computation point towards the necessity of aligning policies with broader economic considerations. The biting economic situation in the country makes it crucial for policymakers to address these challenges to ensure the stability and prosperity of businesses and the well-being of the Nigerian population.