CEM REPORT, TRADE | In a move expected to bring some respite to importers and potentially lower the cost of imported goods, the Central Bank of Nigeria (CBN) has slashed the exchange rate used to calculate Customs duty at the nation’s seaports by 5.3%. This follows a period of relative stability in the exchange rate between the naira and the US dollar.
Details of the Reduction
According to information accessed from the official trade portal of the Nigeria Customs Service (NCS) on Monday, March 4, 2024, the Customs FX duty rate was reviewed downward from ₦1,630.159 per dollar to ₦1,544.081 per dollar. This represents a 5.3% decrease compared to the previous rate of ₦1,630.159 used as of Friday, March 2, 2024. In simpler terms, importers will now pay ₦86.078 less per dollar when clearing goods at the port.
New Customs Duty
Previous Rate: ₦1,630.159 per US Dollar
New Rate: ₦1,544.081 per US Dollar
Reduction: 5.3%
Cost Saving per Dollar: ₦86.078
Impact on Importers and Consumers
The reduction in the Customs FX duty rate is expected to have a positive impact on importers by lowering their costs. This, in turn, could lead to a reduction in the final price of imported goods for consumers. However, industry experts caution that the impact on consumer prices might not be immediate and may vary depending on the specific product and the importer’s pricing strategy.
Industry Reaction
While the news of the reduced Customs FX duty rate is welcomed by importers, some industry players remain cautious. According to Taiwo Mustapha, a licensed Customs agent and industry expert, the volatility in the exchange rate poses challenges for the import business. He argues that a stable and predictable exchange rate is crucial for proper planning and efficient port operations.
“While the reduction is a positive step, it’s crucial to ensure a consistent and predictable exchange rate policy for customs duties,” cautioned Binta Aliyu, a trade finance expert. “Frequent fluctuations can create uncertainty and hinder long-term planning for importers.”
CBN’s Efforts to Stabilize the Naira
The CBN has implemented various measures to stabilize the naira and curb inflation, including raising interest rates and managing foreign exchange liquidity. The recent reduction in the Customs FX duty rate can be seen as an extension of these efforts, aiming to stimulate economic activity by making imports more affordable.
Read Also: CBN Hikes Customs Duty Exchange Rate Again
Looking Forward
The stability of the naira and the CBN’s continued efforts to manage the foreign exchange market will be crucial factors in determining whether the reduced Customs FX duty rate translates to significant cost reductions for consumers. While the immediate impact might be limited, this move by the CBN signifies a positive step towards a more predictable and stable import environment in Nigeria.
Recall that the apex bank last week, issued a new directive to Customs to use the rate on the date of submitting Form M for calculating import duties.
