The Central Bank of Nigeria (CBN) has raised the exchange rate for calculating Customs duties at the nation’s seaports by 1.9 percent following further depreciation in the value of the Naira to the dollar.
The customs exchange duty rate was raised from N1, 593.888/$ to N1, 624.732/$ on Tuesday, according to information obtained from the official trade portal of the Nigeria Customs Service.
With the apex bank’s upward review, the customs duty rate has increased by 1.9 percent, and it adds over N30 to each dollar needed to clear goods at the port compared to the old exchange of N1,593.888/$.
This means that importers opening Form M today will pay more to clear their goods as import duties are benchmarked against the dollar.
Also, importers will open Form M at a higher rate compared to those who opened Form M on Monday, March 11, according to the apex bank’s new directive to Customs to use the rate on the date of submitting Form M for calculating import duties.
Meanwhile, port users have rejected the policy of using the exchange rate on Form M for import duty payment because it will add more challenges to the trade process.
The national president of the Association of Nigerian Licensed Customs Agents, Emenike Nwokeoji, said that using the Form M rate will create a discrepancy in duties paid on similar imports.
According to him, it would further create uncertainties around the pricing structure of goods and services in the country.
“It will also create abnormal increases in the final sale prices of items, which are largely driven by uncertainties, rather than market fundamentals, and will have implications for inflation,” he warned.
The value of the naira dipped by 4.9 percent last week, closing at N1,627.40 to the dollar.
The value of the naira at the Nigerian Autonomous Foreign Exchange Market (NAFEM) dipped further, increasing the spread between it and the value of the Naira at the parallel market.
At the close of business on Friday, the Naira was selling at N1,600 to the dollar on the streets.
At the NAFEM, trades were consummated within the N1,400 and N1,652 dollar limits.
In the forwards market, the Naira rates on the 1-month declined by 1.2 percent to N1,600.35 to the dollar while the 3-month, 6-month and 1-year all declined by 2.5, 2.6 and 2.1 percent to N1,664.04, N1,723.11 and N1,841.52 to the dollar, respectively.
Analysts, while noting that the spread between the NAFEM and parallel rates had persisted for the second week within the N27.40 band, said they expect the naira to trade within a similar band across forex segments, supported by intensified regulatory spotlight.
Analysts at Cordros Research note that “notwithstanding the recent policy actions by the CBN, the currency has remained under pressure, given that the market supply remains frail. However, we are encouraged by the pace of market reforms and the apex bank’s renewed interventions.
“The CBN further reduced the forex backlog after providing a further $200.00 million during the prior week which reduces the backlog to circa $1.60 billion.”
It praised CBN’s initiatives for ensuring the naira assets are attractive to foreign participants (to drive capital importation), and domestic participants (to drive investments over speculation, and clears the forex backlog that dynamics in the forex market may improve and consequently lead to improved liquidity over the medium term.