Financial News Highlights May 10, 2024 – Businesses Pay 23% more in Import Duties, etc

 

Businesses pay 23% more in import duties on volatile naira

Businesses and manufacturers that import critical production inputs are now paying 23 percent more as Customs import duties with the naira retreating against the United States dollar after weeks of stability in April.

Increases In Cost Of Clearing Imports

The cost of clearing imports went up by 23 percent to N1,412.573/$ as of May 8 compared to a year-to-date low of N1,150.16/$ recorded on April 23 when the naira rallied against the dollar after supply of the greenback surged due to reforms by the Central Bank of Nigeria (CBN).

 

This also represents a 48 percent increase in the cost of clearing compared to the N951.941/$ rate previously used in January before the FX duty rate became volatile.

 

The naira rally in April brought significant relief to importers who had grappled with a spike in the cost of clearing imports at the ports.

Importers Comments On The Matter

“The infamous tweaking of import duty rates is destabilising importers and further sapping their investments dry,” said Jonathan Nicole, former president of the Shippers Association of Lagos State.

 

In advanced countries, there are standard windows for calculating import duties and such is not subjected to tweaking at will by government authorities, according to Nicole.

 

“Our economic policies have failed, and the resultant effect of these inconsistencies in rates is for importers to abandon their goods in the ports or relocate to countries where there is import policy stability,” Nicole told BusinessDay by phone.

 

He called on the Central Bank to devise a means to stabilise both the naira and the cargo clearing exchange rate to gain investor confidence.

 

The cost of clearing imports became volatile last year with the 2023 Customs Act. The Act allowed the CBN to use the prevailing exchange rate to determine the rate for calculating import duty.

 

Ijeoma Ezeasor, secretary general of the National Shippers Association of Nigeria, lamented that manufacturers didn’t plan for the CBN to take over the fiscal policy administration in addition to monetary policy.

 

 

 

She said manufacturers are the worst hit because most of the goods ordered and paid for in 2020 when COVID-19 disrupted the supply chain, are now coming into the country and are being cleared with new and higher exchange rates.

“It is a bit of a crisis for manufacturers and exporters of locally manufactured goods because the numbers are no longer adding up. The economy is chaotic, and we need to know who is in charge of the economy, especially in terms of fiscal administration. The CBN is not putting the impact of the volatile rates on planning and cost of doing business,” she added.

 

Giving insight into how the exchange rate for paying duties evolved in almost a year, Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), told BusinessDay that the Nigeria Customs Service Acts 2023 empowers the Central Bank to determine the exchange rate for computation of import duty.

 

“From a legal and technical point of view, it is legal for CBN to fix the FX rate for import duties. Once the exchange rate of naira to dollar goes up or down, the rate for the computation of import duty does the same explaining the current volatility in the import duty environment,” Yusuf explained.

 

Ideally, he said, the exchange rate for computing import duty should be within the fiscal policy space because it relates to trade.

 

“The fiscal policy authorities are more in tune with the realities of business; thus, the FX rate for import duty is used to regulate trade flow and should be within their purview,” he advocated.

 

Yusuf called for a review of the 2023 Customs Act and quarterly hedging of the exchange rate at N1,000 or N1,100 to protect businesses.

 

Also, Obiora Madu, director general of the African Centre for Supply Chain, said the issue of determining import duty rates should be handled between fiscal and monetary policy authorities.

 

He said that the CBN’s trade and exchange department can carry out exchange control responsibilities, which explains why the unit is in charge of determining FX for clearing goods at the port.

 

Madu, however, said that Nigeria needs to look for what works for the nation’s economy if the country wants to grow trade and enable the manufacturing sector that brings in raw materials through the port to create jobs.

Other selected financial news Headlines today:

IMF urges caution over proposed amendment of CBN Act

CBN boosts banks’ strength: Nigeria’s financial future secured

CBN officials demanded $600k bribe to process payment of executed contract, says witness at Emefiele’s trial

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