In a move exacerbating Nigeria’s ongoing currency challenges, the Nigerian Customs Service (NCS) has announced a significant 42.7% increase in the exchange rate for goods clearance. The rate has surged from N951.94/$ to N1356.88/$, marking the second substantial adjustment in as many months, following a 22.8% increase in December.
The shift, documented on the federal government’s single-window trade portal, has raised concerns about heightened production and operating expenses for businesses across the country. The Centre for the Promotion of Privat Enterprise (CPPE) has criticized the decision, highlighting potential adverse effects on the business landscape.
The NCS, responsible for levying duties on imported cargoes with rates ranging from 5% to 35%, determined by the harmonized commodity and coding system (HS code), defends the move as a necessary response to the prevailing exchange rate crisis.
Since the Central Bank unified the exchange rate market in June, Nigeria has grappled with a profound depreciation of the naira, surpassing 100%. Prior to the policy change, the naira traded at an average of N460/$. The Central Bank, currently dealing with a reported backlog of approximately $7 billion, has emphasized clearing this backlog as a short-term priority.
In a recent development, the Central Bank reported the disbursement of $500 million to various sectors as part of the backlog of FX forwards owed to businesses nationwide. The naira’s recent dip to a new low of N1,461.90 to the USD has heightened concerns about the currency’s stability, weakening even below the parallel market rate.
The Customs Service, underlining adherence to Central Bank guidelines, asserts that it does not fix exchange rates independently but uses the official market (NAFEM). However, the current rate of N1356.8/$ remains below the NAFEM window’s rate, standing at N1,461.90 to the USD, according to the Nairametrics daily FX tracker. The situation continues to unfold against the backdrop of Nigeria’s persisting currency woes, with stakeholders closely monitoring the economic implications of these recent developments.
Credit: NairaMetrics