‘Prepare for shutdown of more businesses, sharp fall in revenue’
The Centre for the Promotion of Private Enterprise (CPPE) has warned that an increase of the customs duty exchange rate from N783 to N952/$ would worsen the already-high inflation rate and increase the cost of production.
Recall that the inflation rate rose to 27.33 per cent in October 2023 from 26.72 per cent in September, according to the National Bureau of Statistics (NBS).
A statement signed by the Chief Executive Officer of CPPE, Dr Muda Yusuf, said the recent review would make the cost of importation through official channels even more prohibitive and worsen the operating costs for businesses.
CPPE said this would also cause more industries that are dependent on imported raw materials to shut down while worsening the poverty situation and heightening corruption vulnerabilities in the international trade ecosystem.
It noted that the review has greater incentives for smuggling and could increase the influx of substandard products amid increasing cost of local products even as customs revenue may decline as imports through official channels become difficult.
“The recent decision by the Central Bank to increase the customs exchange rate from N783 to N952/$ would inflict more pains on the citizens, erode profit margins, reduce purchasing power and put the survival of businesses at an elevated risk. The frequent changes in rates are also creating serious issues of uncertainty for investors and making the international trade process increasingly unpredictable,” CPPE said.
According to the Centre, businesses are already contending with an incredibly difficult operating environment arising from severe macroeconomic headwinds.
It said the persistent currency depreciation is making access to intermediate products very difficult for manufacturers, as energy cost remains very high, with purchasing power weak, while investors’ confidence is declining and consumer confidence is on a downward trend.
The CPPE said 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.
The body said this review will impact the cost of all imports, including raw materials for manufacturers, pharmaceutical products, machinery, energy products, petroleum products and many more.
It said it will also make a bad situation worse for investors in the economy and worsen the misery of the citizens amid an excruciating inflationary condition.
It said the CPPE strongly appeals to the CBN and the Coordinating Minister of the Economy to review the increase, noting that Trade policy measures should not be subjected to the full vagaries of the philosophy of market forces.
He said the CBN should allow for a concessionary rate for the computation of import duty to protect the economy and the citizens from the reality of unbearable inflationary pressures.
“We propose that going forward the Central Bank of Nigeria (CBN) should fix the customs duty rate at 20 per cent less than the official exchange rate in the light of the prevailing harsh economic conditions.
“Paradoxically, only recently, the CBN governor, at the CIBN dinner, stressed the importance of giving economic policies a human face. He stated among other things, that we need to develop stronger frameworks for measuring the human condition and ensure that policymakers and business leaders pay as much attention to these measures as they do to macroeconomic indicators.
“In the light of these realities, the CPPE recommends that the CBN should review its decision to increase the exchange rate for customs duty computation. The frequency of rate reviews should also be reduced to minimise uncertainty and risk for investors,” the statement said.
