How unpredictable exchange rate for cargo clearance could jeopardise Customs revenue target — CPPE
…Seeks review of Customs Act to affirm Ministries power to determine exchange rate
By Esther Agbo
The Centre for the Promotion of Private Enterprise (CPPE) has raised concerns over the unpredictable and prohibitive exchange rates used for cargo clearance in Nigeria, warning that this situation could jeopardise the ability of the Nigeria Customs Service to meet its revenue targets.
In a statement released by the CPPE, the organisation highlighted that the volatile exchange rate used for import duty assessments is exacerbating Nigeria’s already high inflation, increasing operational costs for businesses, and worsening the ongoing cost-of-living crisis.
According to the CPPE, this issue not only threatens maritime sector jobs and investments but also risks cargo diversion to neighbouring countries, which could significantly undermine customs revenue collection.
The CPPE has called on the federal government to intervene by pegging the customs duty exchange rate at N1000 per dollar for the next six months through an Executive Order. This proposal aligns with the federal government’s current efforts to alleviate the hardships faced by citizens and businesses. The CPPE noted that the Presidential Committee on Fiscal Policy and Tax Reforms has made similar recommendations, supported by the Organized Private Sector (OPS).
“The Organised Private Sector [OPS] had also strongly advocated in the same vein. The current customs duty exchange rate on the Nigeria Customs Service portal is N1,578/$. This rate has been changing almost weekly, which is not good for the investment environment.
“It is important to clarify that this proposition is without prejudice to the ongoing foreign exchange reforms of the present administration.”
Currently, the exchange rate on the Nigeria Customs Service portal is N1,578 per dollar, fluctuating almost weekly, a situation the CPPE argues is detrimental to investor confidence and the investment climate in general.
Director and CEO of CPPE, Dr. Muda Yusuf, emphasised that this call for a pegged exchange rate is not intended to undermine ongoing foreign exchange reforms. Instead, it aims to separate foreign exchange policy from trade policy.
The CPPE contends that the responsibility for setting the customs duty exchange rate should reside with the Federal Ministry of Finance and the Federal Ministry of Trade and Investment, rather than the Central Bank of Nigeria (CBN), which currently determines this rate.
He said, “We are dealing with two separate issues here. One is about foreign exchange policy, the other is purely a trade policy matter. The responsibility of the CBN should end at the point of opening of Form M for importers within the context of extant foreign exchange policy.
“All other matters relating to international trade should be within the remit of the Federal Ministry of Finance and the Federal Ministry of Trade and Investment. These are the institutions statutorily responsible for trade policy issues. The determination of the customs duty exchange rate by the CBN is an intrusion into trade policy space which needs to be urgently corrected.”
Additionally, he said, to ensure a more stable and predictable trading environment, the CPPE has also called for an amendment to the Customs Act stating, “Meanwhile, in order to permanently address this matter, it might be necessary to amend the Customs Act to move the responsibility of determination of applicable exchange rate for import duty payment to the fiscal authorities.
“This is necessary to bring such rates in alignment with the extant trade policy direction of the government and remove the current avoidable uncertainty around international trade. This is what our peculiar circumstances demand. It is important to localise and adapt economic policy models to our peculiar circumstances.”
