Following concerns over the recent constant drop in foreign exchange, the Chief Executive Officer of the Center for the Promotion of Private Enterprise (CPPE); Dr Muda Yusuf has called for a comprehensive review of the Central Bank of Nigeria’s (CBN) role in determining customs duty rates.
In an exclusive chat with our sister platform; Shipping Position Live last week, Dr Muda Yusuf lamented that the fluctuating exchange rates, particularly due to sharp depreciations, have adversely affected container traffic activities, causing a slowdown in momentum and tempo.
Addressing the issue of customs duty, Dr Yusuf advocated for revisiting existing laws and arrangements to ensure stability and predictability. He suggested fixing a permanent customs exchange rate, possibly between N900 and N1,000 Naira to the dollar, for a specified period, such as three months, six months, or a year.
Dr Yusuf however advocated that fixing a static Customs duty exchange over a period of three months to one year would not only foster economic stability, but also ensure predictability in international trade within the maritime sector.
While emphasizing the importance of stability and predictability in international trade, Dr. Yusuf highlighted the impact of exchange rate fluctuations on import cycles, which can extend up to 60 to 90 days. He commended recent efforts between the central bank and fiscal authorities but stressed the need for further action regarding customs duty determination.
This measure, according to Dr. Yusuf, would provide a framework for planning and contribute to lowering the cost of living by reducing inflation.
“The drop in exchange rate is a very good development for imports and for the maritime sector generally. But the impact may not be immediate because if you look at the import cycle sometimes can be up to 60 to 90 days. So, we pray for sustainability of this current trend which is sustained. Then in a matter of some few weeks or months you begin to see the impact on the activities at the port. So, it is a very good development.
“But I want to plead that in addition to what is happening, The Central Bank and the fiscal authorities should revisit the issue of the customs duty. It’s extremely very important. Yes, there may be laws and regulations that say that the CBN should be determining the Customs duty but you make laws for people, you don’t make people for laws. They need to review that law arrangement for stability and predictability in international trade. It is extremely very important.
“The best way to do it is to fix it for probably three months, six months, or even for a year. Saying for this period of time, this is what the exchange rate for the importation of import duty will be. Between 900 and 1,000 will be okay so that people can plan. Apart from that, it will help to bring down the cost of living. This is because the biggest problem we are facing today, apart from the issue of the exchange rate issue, is generally the cost of living and the problem of inflation” he noted.
Dr. Yusuf expressed concerns about the current system’s lack of stability, citing past intrusions into trade policy by the central bank. He stressed the importance of aligning customs duty exchange rates with market realities to foster stability and predictability in international trade, citing the tariff book as a tool for achieving these goals.
The CPPE boss urged the government to seriously consider fixing the customs duty exchange rate to enhance economic stability and support its efforts to reduce the cost of living. He proposed a rate of around 1,000 Naira to the dollar for the next six months as a viable option to promote stability and predictability in international trade.
“The best option is fixing a permanent exchange rate for the Nigeria Customs Service. It’s the best option for stability because essentially, anything that has to do with import and clearance of cargo should even be exclusively fiscal policy matter. But unfortunately, we now have this component of this exchange rate determination by the CBN, which is also creating an issue.
“We had that problem under the previous dispensation of the central bank. There was a lot of intrusion into trade policy where the central bank was determining what items should go to Forex, and what not with all those confusions. Luckily, that is gone. But this element of it that is affecting international trade, I think we need to address it.
“One way to bring down this is to reduce the exchange rate for the computation of import duty slightly below what the market rate is. That is what we used to have and it will help stability. It is not for nothing that we have our tariff book. Tariff book is a seven-year book and it will ensure stability, predictability in international trade” Dr Yusuf concluded.
