CBN caps import duty exchange rate computation; CPPE commends intervention

The Central Bank of Nigeria (CBN) has advised the Nigeria Customs Service (NCS) to adopt the closing forex rate on the date of opening Form M for the purpose of computing customs duty on imported goods.

The apex bank gave the advise following complaints by importers on the irregular changes in the import assessment levies applied by the NCS.

In a circular dated February 23, 2024, the CBN noted that arbitrary increase in the forex rate used to compute Customs duty have created uncertainties around the pricing structure of goods and services in the country thereby creating “abnormal increases” in the prices of goods in the country.

The circular signed by the apex bank’s Director of Trade and Exchange Department, Hassan Mahmud, read, “Following the liberalisation of the FX market on Willing Buyer-Willing Seller trading principle, the Central Bank of Nigeria has noted the concerns of Importers of goods and services in the irregular changes in the Import Duty Assessment levies applied by the Nigeria Custom Service

“These developments have further built uncertainties around the pricing structure of goods and services in the economy and creating 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 Central Bank of Nigeria wishes to advise that the Nigeria Custom Service and other related Parties adopt the closing FX rate on the date of opening Form M for the importation of goods, as the FX 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 26 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.”

The CBN said while it is mindful of the initial volatility and price distortions in the aftermath of the forex market liberalisation, it remains 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.

Meanwhile, the Centre for the Promotion of Private Enterprise (CPPE) has commended the Central Bank of Nigeria (CBN) for approving the use of the exchange rate reflected on the import documentation ‘Form M’ at the onset of import transactions for the computation of customs duties exchange rate.

The CPPE, however, asked the central bank to take a step further to peg the customs duty exchange rate at N1,000/$ for the rest of the year.

The Chief Executive Officer of CPPE, Dr. Muda Yusuf, said on Sunday in a public statement that pegging the rate at N1,000 would enable the CBN to fully address the troubling issue of the current prohibitive cost of cargo clearance at the ports, which has gone up by over 40 percent in the last two months.

Yusuf said: “The CPPE 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 is a laudable response to the grievances of investors in the economy and would reduce the current uncertainty around imports and related transactions in the economy.

“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.

“There is also the added risk of cargo diversion to neighbouring countries and heightened smuggling which could jeopardise the realisation of customs revenue target.”

In the light of this, the CPPE appealed to the CBN to peg the customs duty exchange rate at N1000/$ 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 current customs duty exchange rate of N1488.9/$, it said, is still too high in the context of the current galloping inflation and difficulties facing businesses and the citizens.

It noted that instances of abandoned cargo are on the increase as a consequence of escalating trade cost, emphasising that these are not good optics for an economy seeking to ensure recovery, drive growth, promote inclusion and guarantee social stability.

He added that 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 him, pegging the customs duty exchange rate resonates with the present intervention measures to mitigate the current hardships in the country.