· New cargo clearance fee will raise inflation – Shipper
By Oluyinka Onigbinde
Friday’s hike in Customs duty exchange rate has been met with overwhelming outcry by different personalities and groups within the nation’s maritime sector.
The Federal Government had on Friday, through the Central Bank of Nigeria raised the exchange rate for cargo clearance from N952/$ to N1.356 per dollar. This effectively translates to a spike in payable import duty.
The latest hike is coming weeks after the rate was increased from N783/$ to N952/$.
In November, the exchange rate for cargo clearance was raised from N757 per dollar to N783 per dollar, representing a 3.4 per cent increase, and was later raised from N783/$ to N952/$ in December.
——CPPE Expresses Grave Concerns Over Hike—–
The Centre for the Promotion of Private Enterprise (CPPE) has expressed grave concerns over the significant upward revision of the exchange rate for import duty computation.
CPPE in a statement made available to our correspondent on Friday by its CEO; Dr. Muda Yussuf said the adjustment, soaring from N952 to N1357, marks a staggering 42.5% increase, a move that could have profound implications for businesses across all sectors.
Yusuf highlighted the precarious situation businesses find themselves in, grappling with the aftermath of a recent currency devaluation triggered by the sudden unification of the exchange rate, pushing the official rate to approximately N1400.
He lamented that the timing of the import duty rate hike, amid the economic challenges, amplifies the difficulties faced by investors, particularly those in the real sector.
The CPPE CEO warned that the consequences of this action could exacerbate inflation, as production and operating costs escalate.
He further lamente that the ripple effect on the vulnerable segments of the population may further plunge them into poverty, aggravating cost-push inflation.
In an appeal to the Central Bank of Nigeria (CBN), Dr. Yusuf urged a reconsideration of the rate hike, emphasizing the potential collapse of numerous businesses already teetering on the brink.
He stressed the need for a policy reversal in the interest of the impoverished segments of society.
The CEO pointed out the immediate implementation of the revised rates, expressing concern about the immense shocks, disruptions, and dislocations it brings.
Yusuf explained that he found the policy difficult to justify, especially in the context of the multifaceted challenges businesses currently face.
Proposing a structural change, CPPE recommends that determining the exchange rate for import duty computation be treated as a fiscal policy matter, falling under the jurisdiction of the finance ministry.
This, according to Yusuf, is essential for proper alignment with existing fiscal policies and ensuring a more balanced and sustainable economic approach.
“The drastic upward review of the exchange rate for the computation of import duty from N952 to N1357 would have a devastating effect on businesses across all sectors.
“This is a whopping 42.5% increase. This is like the last straw.
Businesses are yet to recover from the shocks of the new round of currency devaluation resulting from the sudden unification of the exchange rate which has driven the official exchange rate to about N1400.
“It is double jeopardy for the investors across all sectors especially those in the real sector. This action will further fuel inflation as production and operating costs get escalated. The vulnerable segments of the population will be further impoverished as cost push inflation gets exacerbated.
“CPPE appeals to the CBN to reverse this rate hike in the interest of the already impoverished segments of our society and the numerous businesses that are already on the verge of collapse.
“The shocks, disruptions and dislocations are of immense proportions. It is even worse that the rates take immediate effect. This is a policy action that is difficult to justify, especially in the context of the multidimensional headwinds that businesses are grappling with.
“The CPPE recommends that, going forward, the determination of the exchange rate for import duty computation should be treated as a fiscal policy matter and located within the remit of the fiscal authorities which is the finance ministry. This is necessary for proper alignment with extant fiscal policies” he said.
——–Research Center Critiques CBN, Advocates Comprehensive Policy Evaluation—
Similarly, the Sea Empowerment Research Center has voiced its concerns regarding the Central Bank of Nigeria’s (CBN) decision to raise the customs duty exchange rate to N1,356 per dollar.
The center, represented by Dr. Eugene Nweke, Head of Research, in a communication dated February 2, 2024, sent to our correspondent expressed reservations about the potential ramifications of this move on the nation’s economic landscape.
Nweke highlighted global concerns discussed at the World Economic Forum (WEF), where the drop in global trade volumes during the 2022/2023 period took center stage.
He informed that Dr. Okonja Iweala, Director-General of the World Trade Organization (WTO), suggested various measures to boost global trade, emphasizing the importance of trade policy rebates, eliminating delays, and promoting bilateral agreements.
However, the Sea Empowerment Research Center criticized the CBN’s approach, stating that frequent duty exchange rate increments were an unconventional and unexplored solution to the challenges faced by global trade.
The center proposed a thorough impact analysis on the recent exchange rate increment, urging the Coordinating Ministry to assess its effects on international markets, manufacturing sectors, and the general public.
Nweke emphasized the necessity of considering economic implications before implementing fiscal and monetary policies, aligning with the renewed hope mantra.
The Sea Empowerment Research Center questioned the government’s commitment to understanding the economic landscape, urging a meticulous review of critical indicators such as business closures, downsizing, unemployment rates, stability in the labour market, inflation’s impact on purchasing power, and the overall contribution to economic hardship and poverty.
He argued that neglecting these concerns demonstrated poor administrative sensitivity, calling for a systemic reevaluation of monetary policy tools to ensure fair market practices.
Nweke also raised questions about the CBN’s role in duty exchange rate increments, speculating that it might be a deliberate strategy for revenue generation.
The Center emphasized the need for an independent study to evaluate the impact on international trade, suggesting that such insights could guide the restructuring of monetary and fiscal policies.
Nweke further lamented the disruptions observed in foreign exchange regime administration, particularly concerning the International Chamber of Commerce (ICC) Rules on Uniform Customs and Practice (UCP) for Documentary Credits.
Nweke argued that the Coordinating Minister should conduct an unbiased system study within the nation’s international trading climate to provide recommendations for policy reform.
He further stressed the importance of addressing issues related to international loans, currency devaluation, and the activities of currency dealers (Bureau De Change) and called for measures to discourage insider trading and hacking in banking.
In a final plea, the Sea Empowerment Research Center called for the immediate cessation of the CBN’s practice of incessant exchange rate increments for customs duty assessment.
——-Freight Forwarder Advocates Strategic Action——-
Also, a freight forwarder Chidi Anthony Opara has advocated for strategic engagement and collaboration.
Expressing concerns over the potential economic repercussions, Opara calls on leaders within the subsector to transcend mere rhetoric and adopt proactive measures.
Opara emphasized a departure from what he labels as “empty high sounding names” and an “unnecessary publicity hugging mentality.” Instead, he urges leaders to focus on tangible solutions and strategic collaboration with relevant government agencies.
Drawing a crucial distinction, Opara reminds stakeholders that the Customs service is an agency tasked with implementing policies, not formulating them.
Opara called for a collaborative approach, suggesting that confrontation may not be the most effective strategy.
A pivotal recommendation from Opara is the inclusion of other government agencies in the dialogue, particularly highlighting the Central Bank of Nigeria (CBN), the originator of the policy.
Urging swift action, he proposes engaging with the CBN to secure a potential downward review or a return to the previous status quo.
Furthermore, Opara stresses the importance of unity within the trading sector. He calls for a consolidated effort, emphasizing the need for synergy with organized trading groups. This united front, he believes, will amplify the impact of their concerns and proposals.
Crucially, Opara advocates for a data-driven approach. Before engaging with the CBN, he suggests arming themselves with verifiable data showcasing the policy’s consequences, especially at the microeconomic level. This evidence-based strategy he said will aim lto bolster the credibility and persuasiveness of their case.
“In the light of the above, the sub sector leaders should jettison their love for empty high sounding names and unnecessary publicity hugging mentality and focus on the following:
“They should broaden their engagement policy to include other relevant government agencies, like the Central Bank of Nigeria (CBN).
“They should be mindful of the fact that the Customs service is a policy implementing, not a policy formulating agency.
“They should as a matter of urgency, approach the Central Bank of Nigeria(CBN), from where the policy under reference emanated with the aim of securing a downward review or even a return to status quo.
“They should synergize with the organized trading sector to forge a united front.
“Before approaching the CBN, they should be armed with verifiable data on the consequences of the referenced policy on the economy of the country, especially at the micro level” he said
—–Shipper Says New Cargo Clearance Fee Will Raise Inflation————
A shipper, Rev. Jonathan Nicole, has decried the increase in exchange rate for cargo clearance from N952 to N1,356 per dollar by the Federal Government.
Nicole disclosed this in an interview with the News Agency of Nigeria (NAN) on Friday in Lagos.
He said the new exchange rate for cargo clearance would increase inflation.
“There have been a lot of sad stories as regards doing business in our domain – the maritime sector.
“The new exchange rate will increase inflation and businesses will be grossly affected, terminating projections before imports.
“The rate will affect the manufacturing sector and goods and services will increase. Cost of transportation will skyrocket.
“At the end of a transaction, the general public will be made to pay for the failure of our economic policies.
“Unemployment will increase and some companies are shutting down already due to paucity of funds,” he said.
“The success of a country is determined by the management of the commonwealth for all.
“Where the citizens are impoverished, the nation becomes epileptic and this is what is happening at the moment,” he said.
He, however, urged government to ensure fair distribution of the nation’s resources for all and sundry.
Nicole urged shippers to brace up for tougher policies noting that the current exchange rate would not be the last.
“Government is not blind to the sufferings of her citizens.
“We believe sooner than later the untold hardship will be overwhelmed with collective bargaining to prosperity for all,” he said.
