The Centre for Promotion of Private Enterprise (CPPE) has called on the Federal Government to rethink its policy on tariff exchange rates.
The Director and CEO of CPPE, Muda Yusuf, made the request in a statement on Sunday. He explained that high import tariffs and volatile exchange rates have fuelled already high levels of inflation, increasing production and operating costs for manufacturers and other businesses, exacerbating the cost of living crisis, threatening jobs and investments in the maritime sector, and reducing investor confidence.
He said CPPE is concerned that the issue of exorbitant and unpredictable exchange rates for cargo clearance has yet to be addressed by the government.
“We believe it is a major policy adjustment that needs to happen to complement current measures to address the current cost-of-living crises in the country.
“There is also the added heightened risk of cargo diversion to neighboring countries and smuggling which could jeopardize the realization of customs revenue target. This situation additionally creates serious competitiveness challenges for ethical and compliant investors in the economy because of their relatively elevated production and operating costs.
CPPE therefore appealed to the Presidency to set the customs exchange rate at an initial rate of 1,000 naira per dollar for the next six months through a presidential decree, saying this is in line with the commitment of the current Federal Government to address the current challenges posed to the people and businesses.
“It gratifying that the Presidential Committee on Fiscal Policy and Tax Reforms had made similar recommendation. The Organized private Sector (OPS) had also strongly advocated in the same vein. The current customs duty exchange rate on the Nigeria Customs Service portal is N1578/$. This rate has been changing almost weekly, which is not good for the investment environment.
“It is not a request for a concessionary exchange rate for forex allocation. We are dealing with two separate issues here. One is about foreign exchange policy, the other is purely a trade policy matter.
He said contrary to concerns expressed by some, the introduction of a lower exchange rate for customs calculation would not undermine the current exchange rate reforms.
“These are the institutions statutorily responsible for trade policy issues. The determination of the customs duty exchange rate by the CBN is an intrusion into trade policy space which needs to be urgently corrected.
He noted that the responsibility of the Central Bank of Nigeria (CBN) should end with opening up Form M to importers under the current foreign exchange policy, while all other matters relating to international trade come under the purview of the Federal Ministry of Finance. The Federal Ministry of Finance, which is in charge of trade and investment, should be abolished.
“These are the institutions statutorily responsible for trade policy issues. The determination of the customs duty exchange rate by the CBN is an intrusion into trade policy space which needs to be urgently corrected.
However, to permanently resolve this issue, he explained, it may be necessary to amend the Customs Act and transfer the responsibility for setting the exchange rate applicable to the payment of import duties to the tax authorities.
“This is necessary to bring such rates in alignment with the extant trade policy direction of government and remove the current avoidable uncertainty around international trade.
“This is what our peculiar circumstances demands. It is important to localize and adapt economic policy models to our peculiar circumstances,” he added.
