CEM REPORT, TRADE | The Nigerian import landscape is facing another wave of uncertainty as the Central Bank of Nigeria (CBN) announced its third exchange rate increase for calculating customs duties this year, bringing the rate to N1,417.635/US$.
This upward revision, implemented on February 9th, 2024, translates to higher costs for importers clearing goods at the nation’s seaports, as import duties are directly tied to the dollar value.
Previously, the rate had been adjusted in June, July, November, and December of 2023, followed by two adjustments in February 2024. This frequent fluctuation, according to industry experts, is causing significant disruption and uncertainty for importers, making it difficult to accurately forecast landing costs and profit margins.
CBN’s Policy and Its Implications:
This move follows a series of adjustments since President Tinubu’s administration implemented the floating naira policy in June 2023. While aimed at stabilizing the foreign exchange market, the frequent revisions raise concerns about predictability and transparency. Importers who base their calculations on previous rates struggle to adapt to sudden changes, impacting their profitability and potentially leading to cargo delays at ports.
Impact on Importers and Consumers:
The upward revision translates to higher import costs for businesses, ultimately leading to increased prices for consumers across various sectors. As Bisiriyu Lasisi Fanu, former chairman of the Association of Nigeria Licensed Customs Agents, aptly remarks: “Every commodity in the market has imported input in them.” This implies a widespread impact on goods ranging from essential food items to manufactured products.
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Expert Opinions and Concerns:
Fanu emphasizes the challenges posed by the frequent adjustments: “CBN can’t change the rate and expect the importer to survive… How do you expect them to generate the difference immediately?” Such concerns echo through the business community, highlighting the need for a more stable and predictable exchange rate mechanism.
Looking Ahead:
The CBN’s latest move raises questions about its long-term strategy for stabilizing the naira and controlling inflation. While the aim of the floating exchange rate policy is noble, its effectiveness remains under scrutiny. As Nigerians brace for higher prices, policymakers face the critical task of addressing concerns about transparency, predictability, and the overall impact on the nation’s economy.
