ECONOMISTS have expressed divergent views on adopting a fixed Customs duty exchange rate following frequent changes in the rate, which they believe are creating volatility and hurting the Nigerian economy.
The Central Bank of Nigeria (CBN) has adjusted the Customs duty exchange rate about 38 times since the beginning of this year.
In its latest adjustment, The ICIR reported that the CBN raised the rate by 14 per cent to N1,327.35/$ on Monday, April 29.
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The report noted that the frequent changes significantly burdened the business community and dashed importers’ hopes.
As of May 1, the rate had jumped to N1,373.65/$ from less than N1,200/$ a few days earlier.
The frequent changes have led to high volatility in cargo clearing costs, worsening inflationary pressures and aggravating investment risk, especially in the real sector of the economy.
In recent conversations, renowned economists Bismarck Rewane and Muda Yusuf differed on whether the apex bank could fix exchange on Customs duty.
Yusuf, the chief executive officer (CEO) of the Centre for the Promotion of Private Enterprise (CPPE), issued a statement on Wednesday, May 1, urging the apex bank to adopt a quarterly framework starting at the rate of N1,000/$ to minimise volatility in the Customs duty exchange rate.
He suggested that the adoption be carried out in line with the present administration’s commitment to bolstering investors’ confidence and driving economic growth.
“Such framework should adopt a quarterly Customs duty exchange rate after due consultation with the fiscal authorities. We propose a commencement rate of N1,000/$ Customs duty exchange rate.
“Consultation with the fiscal authorities is imperative because of the trade policy implications of such decisions. It is also consistent with the commitment of the present administration to effective coordination between fiscal and monetary authorities.”
Yusuf buttressed that it took a lot of work for investors to plan under these unstable circumstances as the situation has introduced unprecedented uncertainty and unpredictability to the international trade dynamics.
According to him, investment risk has become elevated, planning has become difficult, risk management has become challenging, and investors’ confidence is being weakened.
He added that it was a double whammy for investors to grapple with volatility in the foreign exchange market and contend concurrently with high unpredictability in the international trade ecosystem, stressing that it differed from Nigeria’s current growth aspirations.
However, in his view, Rewane, CEO of Financial Derivative Limited, said fixing the exchange rate on Customs duty would mean returning to fixing the unregulated exchange rate market when he spoke on Channels Television on Tuesday, May 2.
He said, “I have listened to the question on Customs duty whether you can fix it.
“You cannot fix an exchange rate for a Customs duty. What you can do is take the average for the entire month and say that this is the average.”
“The CBN could set an average for the month,” Rewane said, adding, “but to fix it is the beginning of going back to fix the unregulated exchange rate. The free market system and price mechanism allocate resources efficiently. So, let’s not decide ourselves.”