Timi Bomodi, comptroller of the Seme command of the Nigeria Customs Service (NCS), highlighted the positive impact of the naira devaluation on the country’s exports.
His comments come in the wake of Nigeria’s record-breaking N6.52 trillion trade surplus in the first quarter of 2024. Bomodi shared his insights during an interview with the News Agency of Nigeria (NAN) on Sunday.
He noted that the dynamics of imports and exports are significantly influenced by market forces, particularly supply and demand. He said, “The exchange rate plays a big role in determining the demand or the purchasing power of the people.”
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Discussing the exchange rate’s effect on exports, Bomodi said, “As the value of naira begins to decline, you find out that Nigerian-made goods are considered cheap within the region. This encourages people from neighbouring countries to want to purchase goods from Nigeria. While we complain that the exchange rate has a negative impact on imports, it has a positive impact on exports.”
He explained that although a high dollar value makes it challenging for Nigerians to import goods, it makes Nigerian goods more affordable and attractive to neighboring countries.
“For the first time, you have a net export gain for Nigeria vis a vis her neighbouring countries, because you find out that what makes Nigerians go to their neighbours is now making them come to Nigeria,” he said.
The comptroller also stressed that the devaluation of the naira has had a beneficial impact on the local economy.
“Even a devalued naira is an advantage for export. So it’s not such a negative thing, but in trade, you have to balance both ends,” he said.
Bomodi outlined the critical role of the Seme-Krake border post in facilitating legitimate trade, managing imports and exports, and enforcing government fiscal policies, especially in areas of prohibition.
“The Lagos-Abidjan corridor is considered the most viable trade corridor in West Africa and indeed the whole of Africa. It’s so strategic to the economic development of Africa that the European Union and other international agencies are ready to invest heavily in infrastructure around this axis,” he added.
However, the Nigerian Customs Service has faced criticism for the incessant increases in export and import rates, which many believe hampers trade growth. Economists have reiterated that the customs service is not a revenue-generating agency, calling on the NCS to lower these rates to boost trade, investment, and economic activities.
They note that reducing these tariffs could significantly enhance Nigeria’s competitive edge in the global market, encouraging more robust trade relations and economic growth.
Analysts at Financial Derivatives Company Limited said the naira, which exchanges at around N1,476.12 to dollar at the official market, is currently overvalued by 37.91 percent.
Naira’s current devaluation trajectory started on June 14, 2023, when the Central Bank of Nigeria (CBN) announced the unification of all segments of the foreign exchange (FX) market. The apex bank stated that all FX windows are now merged into the investors and exporters (I&E) window, now known as NAFEM.
Since the naira’s floatation, there have been consistent fluctuations in the FX market.
Economists argue that the significant drop in the naira’s value is beneficial for Nigeria’s efforts to boost exports. Data from the Nigerian Bureau of Statistics (NBS) supports this view, showing that the country recorded a substantial trade surplus, largely due to the naira’s devaluation.
“Nigeria’s total merchandise trade stood at N31,810.59 billion in Q1, 2024. This represents an increase of 46.27% over the value recorded in the preceding quarter and a rise of 145.58% compared to the value recorded in the corresponding period of 2023,” the NBS reported.
Export activities accounted for 60.25% of total trade in the reviewed quarter, with a value of N19,167.36 billion. This marks a 51.00% increase from Q4 2023 and a remarkable 195.47% rise from Q1 2023.