Unstable exchange rate for customs may affect business adversely

Financial experts have warned that the unpredictable exchange rate of the Nigeria Customs Service (NCS), market watchers have warned would affect trade and ultimately business and economy if the apex bank fails to arrest the situation as soon as possible.

They are not happy that, “today, rate for Customs’ will be N1200/$, the next day, it would become N1300/$”, said a clearing and forwarding agent who simply gave his name as James.

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, Center For The Promotion Of Public Enterprise (CPPE), Chief Executive Officer, Dr. Muda Yusuf said.

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

“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 twenty-eight times.” he warned.

According to him, “In April, the frequency of changes would be close to ten times or even more. As at 1st May 2024, the rate has jumped to N1373.65/$. It was less than N1200/$ few days before.”

He went on to state that, “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 Centre therefore appealed to the Central Bank of Nigeria, CBN to adopt a framework to minimize volatility in the customs duty exchange rate in line with the commitment of the present administration to bolster investors’ confidence and drive economic growth.

Such, Yusuf, advised 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, he added.