Centre for the Promotion of Private Enterprise, (CPPE) has said that the recent decision by the Central Bank to increase the customs exchange rate from N783 to N952/$ would worsen the already prohibitive production and operating costs for businesses in the country. A statement issued by Muda Yusuf CEO of CPPE said “it would also inflict more pains on the citizens, erode profit margins, reduce purchasing power and put the survival of businesses at an elevated risk. The frequent changes in rates is also creating serious issues of uncertainty for investors and making the international trade process increasingly unpredictable. The CBN had on June 24, 2023, adjusted the exchange rate from N422.30/$ to N589/$. On July 6, it was re-adjusted to N770.88/$, and again on November 14, it was re-adjusted to N783.174/$, and now reviewed to N951.941/$.
“Already businesses are contending with an incredibly difficult operating environment arising from severe macroeconomic headwinds. The persistent currency depreciation is making access to intermediate products very difficult for manufacturers, energy cost remains very high, purchasing power is weak, investors confidence is declining and consumer confidence is on the downward trend. This is not a good time for the CBN to increase the exchange rate for the computation of import duty and the clearing of cargo by importers. This review will impact the cost of all imports, including raw materials for manufacturers, pharmaceutical products, machineries, energy products, petroleum products and many more. This will make a bad situation worse for investors in the economy. It will worsen the misery of the citizens amid an excruciating inflationary condition. The CPPE strongly appeals to the CBN and the Coordinating Minister of the Economy to review the increase. Trade policy measures should not be subjected to the full vagaries of the philosophy of market forces.
“The CBN should allow for a concessionary rate for the computation of import duty to protect the economy and the citizens from the reality of unbearable inflationary pressures. We propose that going forward, CBN should fix the customs duty rate at 20% less than the official exchange rate in the light of the prevailing harsh economic conditions. The recent review will make the cost of importation through official channels even more prohibitive and this may result in the following unintended outcomes: Greater incentives for smuggling; more industries that are dependent on the imported raw materials may shut down; Customs revenue may decline as imports through official channels become difficult; Worsening an already bad inflation situation; worsening an already bad poverty situation and the welfare conditions of the citizens; heightened corruption vulnerabilities in the international trade ecosystem and increase in the influx of substandard products amid high and increasing cost of products.
“Paradoxically, only recently, the CBN governor, at the CIBN dinner, stressed the importance of giving economic policies a human face. He stated among other thing, that “…we need to develop stronger frameworks for measuring the human condition and ensure that policymakers and business leaders pay as much attention to these measures as they do to macroeconomic indicators” In the light of these realities, the CPPE recommends that the CBN should review its decision to increase the exchange rate for customs duty computation. The frequency of rate reviews should also be reduced to minimise uncertainty and risk for investors”.