In a span of just 24 hours, the Nigerian government made another change to the exchange rate used by the Nigeria Customs Service (NCS) for the importation of goods. This recent alteration marks the sixth time that the rate has been raised in the past eight months.
The Central Bank of Nigeria (CBN), in what has been described by critics as a “highly unusual move”, adjusted the exchange rate on Saturday, February 3, 2024 to N1,413.62 per dollar. The latest adjustment came just 24 hours after the previous one, which increased the rate from N951.941/$1 to N1,356.883/$1.
The exchange rate is set by the Central Bank of Nigeria (CBN) and is used to determine the amount of Duty collected for the importation of goods. The frequent fluctuations in the exchange rate have led to uncertainty and confusion among importers, as well as increased costs and delays.
Just as the dust was settling from the Central Bank of Nigeria’s (CBN) recent review of the exchange rate, it seems to have taken a turn for the worse. The new rate of N1,413.62 per dollar is causing a great deal of confusion and concern among importers, who were still adjusting to the previous hike of N1,356.42 per dollar. The latest increase is adding further fuel to the fire, with the country’s economy already facing a number of challenges, including inflation and a weak naira.
The rise in the exchange rate has sparked concern among maritime experts, who warn that Nigerian importers will have to pay more to clear their goods at the ports as import duty is calculated in relation to the dollar. With the new increase, some reports indicate that import duty has tripled in the past seven months since President Bola Ahmed Tinubu took office.
Coupled with the constant fluctuations in the exchange rate, importers are having a difficult time planning for the future. With such unpredictable changes, they are finding it difficult to budget for their importation costs, leading to a lot of uncertainty. The constant changes are also making it difficult for them to keep up with the latest information, leading to confusion and frustration. The impact of these fluctuations is having a ripple effect on the economy, as importers struggle to maintain their businesses and keep prices stable for consumers.
The situation is also worrying for members of the Manufacturers Association of Nigeria (MAN), who have been hit hard by the forex crisis and the constant fluctuations in the exchange rate. These businesses are responsible for a significant portion of imports into the country, and the higher costs of doing business are putting a strain on their operations. As a result, the cost of goods and services in the market is likely to increase as well, further affecting consumers and putting additional pressure on an already struggling economy.
According to Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprises (CPPE), the increase in the exchange rate will have a far-reaching impact on the Nigerian economy. He pointed out that the country had already seen a drop in the volume of imports in 2023, and this is likely to worsen as a result of the new rate. Yusuf further explained that the increase will have an impact on every aspect of economic life in the country, from the cost of living to the cost of doing business.
“We have enough problems with the exchange rate. Now we are having an additional burden of import duty hike because it is like increasing import duty across the board maybe by another 15 percent or more; that is what it is,” the Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE),” he stated.
The former director-general of the Lagos Chamber of Commerce and Industry (LCCI), further highlighted the specific impacts that the increase in the exchange rate will have on the country’s maritime sector. He stated that the sector is likely to see a slowdown in trade activity, an increase in the cost of transportation and shipment, and higher costs for clearing goods. All of these factors, he explained, will have a negative impact on the economy and could lead to further deterioration in the country’s trade balance.
Lucky Amiwero, president of the National Council of Managing Directors of Licensed Customs Agents (NCMDLCA), expressed his concern that the government’s policy is pushing more people into poverty. He argued that the increase in the exchange rate is making it increasingly difficult for people to import goods, leading to a further decline in living standards. Amiwero argued that the blame should not be placed on the Nigerian Customs Service, but rather on the government’s policies. He further stated that the increasing difficulty in obtaining foreign exchange is exacerbating the problem.
The NCMDLCA president further highlighted the dire situation, noting that the ports are becoming increasingly empty as people are unable to import goods due to the rising costs of foreign exchange. He also pointed out that the prices of goods and commodities in the market are continuing to rise as a result of this situation.
“Many people have lost their jobs, traders are closing shops. The situation is pathetic because we don’t have what it takes to sustain this suffering. The government should intervene before it results in a crisis,” he said.
Eugene Nweke, a former national president of the National Association of Government Approved Freight Forwarders (NAGAFF), has warned that the increase in the exchange rate will have overwhelming consequences for the Nigerian public.
Nweke stressed that the lack of attention given to fiscal policies that would support the country’s freight logistics chains is a major factor contributing to the underperformance of Nigeria’s trade volumes. He stressed that policies that fail to take into account the needs of the logistics sector will ultimately hinder the ability of the country to trade with other nations.
In light of the potential consequences of the exchange rate increase, Nweke urged the coordinating minister of the economy to direct the CBN to stop adjusting the exchange rate for customs duty assessment. He argued that such repeated increases are not in the best interest of the Nigerian people, who are already overburdened by economic hardship. He called on the minister to put the needs of the citizens first and maintain a stable exchange rate to facilitate trade and investment.
In a bid to quell the public’s concerns and allay fears of further market volatility, the Central Bank has issued a circular with guidelines aimed at reducing the risks associated with speculation in the foreign exchange market. The circular states that commercial banks should not hold long-term positions in foreign exchange, as doing so could lead to excessive speculation and depreciation of the local currency. The apex bank stressed its commitment to stabilising the forex market and ensuring that the naira remains strong and competitive in the global economy.
In a statement, Yemi Cardoso, the CBN governor, noted that the current naira exchange rate does not reflect the true strength of the currency. He stated that the bank is working to improve the naira’s value and make it more competitive globally. Cardoso also emphasised the need for cooperation between the CBN and the ministry of finance to implement inflation-taming policies and stabilise the turbulent exchange rate.