CPPE to CBN: Customs’ FX rate hike is a burden for Nigerians

The Centre for the Promotion of Private Enterprise (CPPE) has raised concerns over the recent decision by the Central Bank of Nigeria (CBN) to increase the customs foreign exchange rate.

Muda Yusuf, chief executive officer (CEO) of CPPE, spoke in a statement on Sunday.

The CBN raised the exchange rate for cargo clearance from N783 per dollar to N952/$ last week Thursday.

The development came barely three weeks after the rate was increased from N757/$ to N783/$.

Commenting on the move, Yusuf said the decision will have a detrimental effect on various economic sectors, including manufacturing, energy, and consumer confidence.

He said the move would inflict more pain on the citizens, erode profit margins, reduce purchasing power and put the survival of businesses at an elevated risk.

“The frequent changes in rates are also creating serious issues of uncertainty for investors and making the international trade process increasingly unpredictable,” Yusuf said. 

“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 boss therefore appealed to the CBN and Wale Edun, the coordinating minister of the economy, to review the increase.

‘ENCOURAGES SMUGGLING, DECLINE IN REVENUE’

Speaking further, Yusuf highlighted the effects of the hike in the exchange rate as the high cost of importation, greater incentives for smuggling, more industries that are dependent on the imported raw materials may shut down, and a decline in customs revenue as consequences.

He also said the move would result in 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 an increase in the influx of substandard products amid high and increasing cost of products.

Yusuf urged the CBN to review its decision to increase the exchange rate for customs duty computation. 

He said the apex bank 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 CEO said. 

Yusuf said the frequency of rate reviews should also be reduced to minimise uncertainty and risk for investors.