THE Centre for the Promotion of Private Enterprise (CPPE) has said not addressing inconsistencies and volatility in  Customs Duty foreign exchange (FX) rate is increasing the risk of cargo diversion, smuggling, and revenue shortfalls for the Nigerian government.

In a statement on Sunday, August 18, the chief executive officer (CEO) of CPPE, Muda Yusuf, said there was a need for the government to revisit the policy on customs duty exchange rate.

“The high and volatile exchange rate for import duty assessment is fueling the already high inflation, increasing production and operating costs for manufacturers and other businesses, worsening the cost-of-living crisis, putting maritime sector jobs and investments at risk, and weakening investors’ confidence.

“There is also the added heightened risk of cargo diversion to neighbouring countries and smuggling, which could jeopardize the realization of customs revenue target,” Yusuf said.

According to him, the situation additionally creates serious competitiveness challenges for ethical and compliant investors in the economy because of their relatively elevated production and operating costs.

He reiterated the CPPE’s appeal to the presidency to peg the customs duty exchange rate at N1000 yo a dollar for the next six months in the first instance through an Executive Order.

He pointed out that the appeal resonates with the federal government’s commitment to alleviating the current hardships on the citizens and the burden on businesses.

“It is gratifying that the Presidential Committee on Fiscal Policy and Tax Reforms made a similar recommendation. The Organized Private Sector (OPS) had also strongly advocated in the same vein.

“The current customs duty exchange rate on the Nigeria Customs Service portal is N1578/$.  This rate has been changing almost weekly, which is not good for the investment environment,” the CPPE boss and renowned economist said.

Yusuf clarified that the proposition was without prejudice to the ongoing foreign exchange reforms of the present administration.

He said contrary to concerns expressed in some quarters, the adoption of a lower exchange rate for computation of customs duty would not undermine the current foreign exchange reforms, explaining that it is not a request for a concessionary exchange rate for forex allocation.

“We are dealing with two separate issues here. One is about foreign exchange policy, the other is purely a trade policy matter.

“The responsibility of the CBN should end at the point of opening Form M for importers within the context of extant foreign exchange policy.  All other matters relating to international trade should be within the remit of the Federal Ministry of Finance and the Federal Ministry of Trade and Investment,” he explained.

He noted the two ministries are saddled with trade policy issues but that the determination of the customs duty exchange rate by the CBN is an intrusion into trade policy space that needs to be urgently corrected.

Lamenting that the government has yet to address the unpredictable exchange rate for cargo clearance, the CPPE boss said, “We believe it is a major policy adjustment that needs to happen to complement current measures to address the current cost-of-living crises in the country.

He said to permanently address this matter, it might be necessary to amend the Customs Act to move the responsibility of determining the applicable exchange rate for import duty payment to the fiscal authorities.

“This is necessary to bring such rates in alignment with the extant trade policy direction of government and remove the current avoidable uncertainty around international trade.

“This is what our peculiar circumstances demand.  It is important to localize and adapt economic policy models to our peculiar circumstances,” Yusuf added.

The ICIR recalls that the CPPE boss had in February this year called on the Central Bank of Nigeria (CBN) to peg the customs duty exchange rate at N1000/$1 to ease the current hardship in the country.

There have been worries, especially from the corridor of the manufacturing sector, that the constant rise in customs duty above the official foreign exchange rate figure was not incentivising access to raw material and local production.

The director-general of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, had told The ICIR exclusively that the constant rise in customs-duty rate is stifling local production and importation of raw materials for the manufacturing sector, besides raising other concerns.