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The Centre for the Promotion of Private Enterprise (CPPE), on Friday, described the recent upward review of the exchange rate for the calculation of import duty from N952 to N1,357 as a double jeopardy for investors in the real sector.
The CPPE added that this may be the last straw that would culminate in total devastation of businesses across all sectors of the Nigerian economy.
The Chief Executive Officer of CPPE, Dr. Muda Yusuf, told THISDAY on Friday that, “the drastic upward review of the exchange rate for the computation of import duty from N952 to N1357 would have a devastating effect on businesses across all sectors. This is a whopping 42.5 percent increase. This is like the last straw.
“It is double jeopardy for the investors across all sectors, especially those in the real sector. This action will further fuel inflation as production and operating costs get escalated. The vulnerable segments of the population will be further impoverished as cost push inflation gets exacerbated.”
Yusuf noted that it was worrisome that the upward review was coming at a period when businesses were yet to recover from the shocks of the new round of currency devaluation resulting from the sudden unification of the exchange rate, which has driven the official exchange rate to about N1400.
The CPPE appealed to the CBN to reverse the rate hike in the interest of the already impoverished segments of our society and the numerous businesses that are already on the verge of collapse.
Yusuf argued that the shocks, disruptions and dislocations that would follow the review would be of immense proportions for businesses to bear.
He said: “It is even worse that the rates take immediate effect. This is a policy action that is difficult to justify, especially in the context of the multidimensional headwinds that businesses are grappling with.
“The CPPE recommends that going forward the determination of the exchange rate for import duty computation should be treated as a fiscal policy matter and located within the remit of the fiscal authorities which is the finance ministry. This is necessary for proper alignment with extant fiscal policies.”
He argued that the continuous decision by the CBN to increase the customs exchange rate would worsen the already prohibitive production and operating costs for businesses in the country.
It would also inflict more pains on the citizens, erode profit margins, reduce purchasing power and put the survival of businesses at an elevated risk.
According to him, the frequent changes in rates is also creating serious issues of uncertainty for investors and making the international trade process increasingly unpredictable.
He recalled that the CBN had severally increased the rate since June 24, 2023, when it adjusted the exchange rate from N422.30/$ to N589/$. On July 6, it was re-adjusted to N770.88/$, and again on November 14, it was re-adjusted to N783.174/$, and it was reviewed to N951.941/$ in December 2023.
“Already businesses are contending with an incredibly difficult operating environment arising from severe macroeconomic headwinds. The persistent currency depreciation is making access to intermediate products very difficult for manufacturers, energy cost remains very high, purchasing power is weak, investors’ confidence is declining and consumer confidence is on the downward trend.
“This is not a good time for the CBN to increase the exchange rate for the computation of import duty and the clearing of cargo by importers. This review will impact the cost of all imports, including raw materials for manufacturers, pharmaceutical products, machineries, energy products, petroleum products and many more,” Yusuf pointed out.
Reacting to the increase, the Public Relations Officer, Association of Nigerian Licenced Customs Agents (ANLCA), Onome Joy Monije, said this was not what Nigerians bargained for, adding that the sharp increase would definitely affect the profit margins of stakeholders in the industry.
“The increase is too sharp. We are going to reach out to the world to hear us by Monday. We are not fighting with anybody. We are going to come out en masse to let the world know what we are going through. The last increase was done in December last year and people are yet to recover from the increment. This increment is too massive from 956 to 1356. We are being pushed to the wall,” she said.
“We woke up this morning without any notifications or information on the custom portal. The increment is massive, this is bad and unacceptable. It is we the common masses that are going to suffer,” she lamented.
On his part, the National President, Council of Maritime Transport Unions and Associations (COMTUA), Adeyinka Aroyewun, stated that the maritime transport industry was greatly affecting businesses, saying the volume of import and export has reduced while the transport and logistics is on the decrease.
“It has affected the volume of cargo. It is affecting our business in terms of volume and revenue generation negatively,” he added.
James Emejo, Nume Ekeghe and Dike Onwuamaeze
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