CPPE: Volatility in Customs Duty Exchange Rate Hurtful to Economy

Dike Onwuamaeze

An economist and founder of Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, has decried the frequent changes in Customs’ duty exchange rate, which he pointed out had taken place 39 times this year alone, saying it was a huge burden on the business community.

Yusuf, said yesterday, that this has led to high volatility in cargo clearing costs, worsening inflationary pressure and aggravating investment risk, especially in the real sector of the economy. 

He said: “These frequent changes are profoundly detrimental to production, planning and other real sector activities in the Nigerian economy.

“In the first quarter of this year, there were changes in the customs duty exchange rate 28 times.  In April, the frequency of changes would be close to 10 times or even more.

“As at 1st May 2024, the rate has jumped to N1373.65/$.  It was less than N1200/$ few days before,” adding that “it is extremely difficult for investors to plan under these unstable circumstances.

“The situation has introduced an unprecedented level of uncertainty and unpredictability to the international trade dynamics.

“Investment risk has become elevated, planning has become difficult, risk management has become challenging and investors’ confidence is being weakened.”

He added: “It is double whammy for investors to grapple with volatility in the foreign exchange market and contend, concurrently, with high level of unpredictability in the international trade ecosystem. This is not consistent with our growth aspirations at this time.”

The CPPE, therefore, appealed to the Central Bank of Nigeria (CBN) to adopt a framework that would “minimise volatility in the customs duty exchange rate in line with the commitment of the present administration to bolster investors’ confidence and drive economic growth.”

It said such framework should adopt a quarterly customs duty exchange rate, after due consultation with the fiscal authorities.

“We propose a commencement rate of N1000/$ 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 said.