Within two months, the import duty rate has changed twice with possibility of it changing again before month end.
Duty rate is decided by the Central Bank of Nigeria depending on the official exchange rate in the country.
Since the exchange rate has continued to move up, it is expedient for the import duty rate to also be jerked up according to the enabling law of the country.
For instance, the implementation of the new foreign exchange policy, which moves the naira to dollar exchange rate from 197 to a minimum of 280, Customs duties on imported cargoes have risen by about 43 per cent.
Prior to the adjustment of the exchange rate, the duties on imported items had earlier been calculated on N197 to a dollar rate despite the high rate in the black market.
However, a circular that was recently issued to all zonal coordinators and Customs Area Controllers, directed that the relevant provisions in the Customs and Excise Management Act on the evaluation of duty for cargoes should be complied with.
The circular, signed by the Deputy Comptroller-General, Tariff and Trade, Nigeria Customs Service, A. Adewuyi, read, “In consonance with the provisions of CEMA on the evaluation and clearing of imported goods into the country, Mr. President has approved the use of the exchange rate at the time of making entry as provided in CEMA, Customs and Excise Notice No.13 on the value of imported goods.
“Where the value of an imported good is shown in foreign currency, such value is to be converted to the equivalent of Nigerian currency as at the rate at the time of making entry. The current rates of exchange are published at the Customs House.”
It added that the Comptroller-General, of Nigeria Customs Service, Col. Ahmed Ali (retd.), had directed that all declarations in respect of imported goods whose values were shown in foreign currencies must comply with the provision.
And aside from import duty hike, a declining exchange rate obviously decreases the purchasing power of income and capital gains derived from any returns.
With this, the new duty rate will automatically increase the price of clearing cargoes at Nigerian ports.
The new exchange rate will change Pre Arrival Assessment Result (PAAR) and affect virtually all other revenue charges, it then means that price of clearing vehicles will be higher and it will be passed to the final consumers
Moreover, aside import duty, the exchange rate influences other income factors such as interest rates, inflation and even capital gains from domestic securities.
While exchange rates are determined by numerous complex factors that often leave even the most experienced economists flummoxed, investors should still have some understanding of how currency values and exchange rates play an important role in the rate of return on their investments.
Also, Foreign investors inevitably seek stable countries with strong economic performance in which to invest their capital. A country with negative attributes such as Nigeria will draw investment funds away due to economic risk.
Nigerian NewsDirect believes that the exchange rate is one of the most important determinants of a country’s relative level of economic health.
Exchange rates also play a vital role in a country’s level of trade, which is critical to most every free market economy in the world. For this reason, exchange rates are among the most watched, analyzed and governmentally manipulated economic measures.
But exchange rates matter on a smaller scale as well: they impact on the real return of an investor’s portfolio therefore, the instability and continued depreciation of the naira in the foreign exchange market has resulted in declines in the standard of living of the populace, increased cost of production which also leads to cost push inflation.
It also tended to undermine the international competitiveness of non-oil exports and make planning and projections difficult at both micro and macro levels of the economy.
Also, a good number of small and medium scale enterprises have been strangled out as a result of low dollar/ naira exchange rate and so many other problems resulting from fluctuations in exchange rates can also be identified.
Therefore, we suggest a Customs import duty system independent of the Central Bank of Nigeria (CBN) in other to save us the increase in customs duty anytime there is increase in the foreign exchange rate.