The Customs Duty Rate, being the rate with which Customs evaluate imports to arrive at duties to pay, is normally affected by the prevalent exchange rates against the Naira. In recent weeks, we have seen the Naira suffer a hit against the major currencies, falling to as low as N1,900 against the Dollar and N2,250 against the Pound Sterling, in the parallel market. The volatility recorded with the exchange rates has made the CBN adjust the Customs Duty Rate up to six times in February alone.
While the CBN defends its stand on the point that the Customs Rate is simply following the official exchange rate of the Naira, we at LCCI expect that the CBN will leave this rate at a much more affordable level to at least cushion the pains importers are already suffering in terms of higher import prices due to recent supply chain disruptions caused by the war in Ukraine and more recently attacks at the Red Sea.
We call on the CBN to stop the upward review of the customs rate and reverse it to a lower rate for the purpose of importation. This way, importers would be able to charge lower prices for their goods according to what costs they incur on the shipments. In addition, any fixed rate should be held for a specified time frame (e.g., quarterly) so people can plan. An element of predictability for planning purposes is highly desirable.
We have always advocated that the government should stop subsidizing consumption and invest such funds to subsidize production activities. A relief or palliative through import duties is more impactful as it affects the prices of goods consumed by more people than the transfers of cash to people as palliatives in the recent past.
Having a fixed rate for import duties also helps businesses to plan ahead for their import portfolios. As it is today, if the CBN continues to adjust the Customs Rates according to the current volatility of the exchange rates, businesses would be at a loss about how to plan for the months ahead.
The CBN should fix a rate lower than what it is now and leave it at that rate for the purpose of importation.
DR CHINYERE ALMONA, FCA
DIRECTOR GENERAL
LAGOS CHAMBER OF COMMERCE & INDUSTRY
21 FEBRUARY 2024
