In a bid to address pricing irregularities and provide more predictability in the cost of imported goods, the Central Bank of Nigeria (CBN) has instructed the Nigerian Customs Service (NCS) to adopt the FX closing rate on the date of Form M submission by importers for the clearance of goods and import duty assessment.
The directive, outlined in a circular issued on Friday by Hassan Mahmud, the apex bank’s Director of Trade and Exchange Department, aims to mitigate the disruptions caused by frequent updates on customs duties rates, which have led to inconsistencies in pricing and unpredictable increases in the final cost of goods in the market.
The circular states: “To this effect, the Central Bank of Nigeria wishes to advise the Nigeria Customs Service and other related parties to adopt the FX rate on the date of opening the Form M for importation of goods, as the FX rate to be used for import duty assessment. This rate remains valid until the date of termination of the importation and clearance of goods by the importers.”
Tekedia Mini-MBA edition 15 (Sept 9 – Dec 7, 2024) has started registrations; register today for early bird discounts.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
The constant changes in customs duty rates have led to pricing irregularities, resulting in unpredictable increases in the final cost of goods in the market. The new directive is to enable the Nigeria Customs Service and the importers to effectively plan appropriately and reduce uncertainties around varying exchange rates in determining revenue, or cost structure respectively.
The circular mandates the NCS to utilize the foreign exchange (FX) closing rate on the date of Form M submission by importers for the clearance of goods and import duty assessment. This fixed rate will remain valid until the termination of the importation and clearance process by the importers.
Effective from February 26, 2024, the closing rate on the date of opening of Form M for importation of goods and services will be the rate applied for assessment purposes, superseding the previous requirement outlined in Memorandum 9, J (2) of the Central Bank of Nigeria Foreign Exchange Manual (Revised Edition) 2018.
Foreign Exchange Rates for Import Duty Assessment…https://t.co/Dxo1CJ3JgA pic.twitter.com/r4Wbt95N5U
— Central Bank of Nigeria (@cenbank) February 23, 2024
This directive comes in the wake of yet another Customs duty rate review by the CBN, raising the duty rate for clearing imported items by 4.5 percent on February 21, 2024. The updated rate, according to the Nigeria Customs Service official trade portal, increased from N1,537.073/$ to N1,605.82/$, necessitating importers to allocate more funds for duty payment compared to previous rates.
The new rate is notably the highest the nation’s port industry has witnessed since the central bank introduced FX reforms in June 2023 to stabilize the foreign exchange rates.
Concerns have arisen regarding the potential adverse impact of elevated customs clearance rates on the already strained economic situation in Nigeria, prompting calls for government intervention.
Former Labour Party’s presidential candidate, Peter Obi, cautioned against arbitrary and continual increases in customs duties, citing their contribution to inflationary pressures and escalating living costs.
“If this situation is not corrected, our importers may resort to using ports of nearby countries, a situation that will leave our ports under-productive, and further deepen our economy into a worse situation as a result of loss of revenue,” he warned.
The Nigerian Customs embarked on the auctioning of seized food items, especially rice, at a reduced price (N10,000 per 25kg bag) on Friday, as a way of easing the economic pains of Nigerians.
Economists, however, advocate for a reduction in import duties and tariffs as a more effective means of alleviating economic hardships for Nigerians, citing direct benefits such as increased disposable income and enhanced purchasing power.