CEM REPORT, TRADE | The Nigeria Customs Service (NCS) has thrown a curveball at importers by adjusting the cargo clearance exchange rate to a staggering N1,356.883 per dollar, effective February 2nd, 2024. This marks a near-doubling of the rate from just two months ago, raising concerns about rising inflation and its impact on businesses and consumers alike.
The Customs had on June 24, 2023, adjusted the exchange rate from N422.30/$ to N589/$ and on July 6, 2023, it was adjusted to N770.88/$, on November 14, 2023, it was adjusted to N783.174/$, in December it was adjusted to N951.941/$ and now it has been moved to N1, 356.883/$.
The new rate is still ₦56.242 below the official CBN rate of ₦1,413.125/$ suggesting the NCS is gradually aligning its policy with the central bank’s. However, the increase remains significant and is expected to have repercussions for both importers and consumers.
Cargo Clearance Industry Concerns:
Importers are feeling the heat, forced to source dollars at exorbitant rates and grapple with higher import duties. Tony Anakebe, a licensed Customs agent, highlights the strain: “The high FX rates are leading to a decline in imports, putting pressure on businesses already struggling with limited access to bank loans.”
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The NCS maintains it adheres to the official CBN window for exchange rates and refutes any accusation of arbitrary adjustments. Comptroller General Adewale Adeniyi reiterated this stance earlier this year, emphasizing the impact of the unified exchange rate policy on their operations.
The Gap and the Target:
While the new rate remains ₦56.242 below the ₦1,413.125/$ seen in the official CBN window, it signals a gradual convergence towards that target. This raises concerns about further adjustments and their potential consequences.
Potential Impact:
Analysts warn that the higher exchange rate could translate to higher import costs and, ultimately, higher prices for consumers. This could exacerbate the already existing inflationary pressures, further impacting household budgets and economic growth.
The Road Ahead:
Questions remain about the long-term implications of this policy shift. Businesses are likely to adapt by adjusting their pricing strategies and sourcing strategies, while consumers will brace for potential price hikes. The government and the NCS must prioritize measures to mitigate the impact on businesses and consumers, ensuring a balance between trade policy and economic stability.
The latest exchange rate adjustment by the NCS throws a wrench into the import landscape, raising concerns about inflation and its impact on businesses and consumers. While the reasons behind the move remain unclear, its effects will be felt across the economy. Only time will tell how effectively the government and relevant stakeholders can manage this latest development and navigate its potential challenges.
