…From N422 To N770/$
Importers are spending more money to pay to clear their goods at the ports following the adoption of the N770/$ exchange rate representing 82.46 percent on duties and levies on imported goods by the Nigeria Customs Service (NCS).
An insider source confided to InsideBusinessNG that the Service from last week uses the current official foreign exchange rate applicable for the day. This is determined by market forces.
Prior to last week when the new rate was adopted, InsideBusinessNG gathered that the official exchange rate on duties and levies on imported vehicles and other commodities was N422.3/$.
Owing to this new rate, InsideBusinessNG was told that importers and manufacturers have abandoned their cargoes at the ports because their assumptions before the importation of the goods can no longer meet up with what they have to pay to clear their goods.
“The NCS has reviewed upwards the exchange rate they normally use for import duties from N422/$ to N770. Assuming you are importing goods valued at $100,000 and the exchange rate was N422, then you multiply the N422 by $100,000. But now, the rate adopted is N770 to a dollar.
The upward review followed the recent FX rates unification which has raised the foreign exchange rate to about N800/$, up from about N465/$, a development policy analysts described as “one hike too many.”
This development will increase the prices of items in the market and again, rev up inflation which currently stands at 22.7 percent
Nigerian Customs spokesman, Abdullahi Maiwada, said the service was operating according to the official foreign exchange rate set by the Central Bank of Nigeria.
“Now, the exchange rate NCS use now is N770. When you multiply it by $100, 000 you know how much it will add up to and the difference between the new conversion rate and the old rate is huge,” Muda Yusuf confirmed the development to our correspondent.
He added thus: “For many people now, to clear cargo in the ports, whether it is vehicles, machinery, raw materials, their cost assumptions have collapsed completely. Some have abandoned their cargo now at the ports.”
The immediate past Director General of the Lagos Chamber of Commerce and Industry (LCCI) lamented the plight of local businesses and urged the government to look into the situation, saying there is so much the citizens can absorb at the same time.
“There is no law that says the government cannot tell its agencies to stop any increases at this time. After all, we have better fiscal space now. We are making savings from petrol subsidy removal, and the foreign exchange unification. We can give back on those savings by concessions we give in terms of taxes or import duty,” the policy analyst submitted.
He is of the view that even in the market economy, there is a situation where prices might get to and the government would intervene to restore equilibrium for social and political reasons, stressing that such intervention is allowed in economic management.
A popular clearing agent told our correspondent that one of his clients has abandoned his cargo after Customs told him the new applicable rate last week.
The agent who did not want his name on print said “The cost implication of Customs new duty foreign exchange rate is huge. Many more are likely to abandon their goods because clearing goods at the new duty rate exposes owners to losses.
“My client told me that there is a limit to the cost burden you can pass on to customers. He is afraid he won’t be able to sell his goods if he increases the prices by 50 percent above his prevailing price.”
Early in June, the National Service (NCS) adjusted the official exchange rate on duties and levies on imported vehicles and other commodities from N422.3/$ to N589.45/$ after the devaluation of the Naira.
In the past eight years, Customs has, several times, reviewed the exchange rate for import duties to reflect the weakening Naira value at any given time, with a pass-on effect on the cost of production for manufacturers and prices of goods for consumers.
Following the recent fuel subsidy removal, planned hikes in electricity tariffs, and rising costs of production stakeholders fear that the import duties hike will further worsen the poverty rate and the economy, particularly the transport sector.
Lamenting their frustrations, the Secretary General of the Association of Micro Entrepreneurs of Nigeria (AMEN), Fredrick Nwokeleme, said their members could no longer with the situation.
Nwokeleme who manufactures Phyto Herbal Cream, Jubilant Cheese Butter Cream, and other household daily needs products said: “…the economic situation, the worsening foreign exchange rate, and high cost of fuel have combined to ground production of products.”
According to him, most manufacturing outfits that were making use of foreign raw materials had to shut down due to the devaluation of the Naira which he said particularly pushed the prices of some chemical components of their products to the extent that he could no longer afford it, citing the price of fragrance, for illustrative instance which rose by multiples. (Inside Business Online)
