Customs Duty Exchange Rate Hits N1530/$ Amid Naira Depreciation Continues

In a development impacting import economics, the Nigerian Customs Service (NCS) has adjusted its exchange rate for duty collections to N1530/$, up from N1492/$, reflecting a direct response to the naira’s depreciation.

This change marks a significant shift following the currency’s drop to N1533.99/$ in the NAFEM window, hitting a monthly low.

The adjustment comes amidst fluctuating forex dynamics, where Wednesday saw a notable surge in turnover by 124.56%, totaling $289.14 million, only to see a slight dip of 5.63% to $272.86 million by Thursday. This reduction in forex liquidity likely contributed to the naira’s weakening against the dollar.

“The increase in the customs exchange rate is necessary to align with current market conditions,” remarked an official from the NCS, highlighting the ongoing challenges in forex management. The decision aims to stabilize revenue streams amidst economic volatility, despite criticism from business stakeholders.

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Critics, including the Centre for the Promotion of Public Enterprise (CPPE) and the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), have voiced concerns over the implications of these adjustments. They argue that such moves, coupled with recent hikes in benchmark interest rates by the Central Bank of Nigeria (CBN), may exacerbate inflation pressures.

“The constant adjustments in customs duties rates and interest rates risk inflating prices across sectors,” cautioned Mr. Dele Oye, President of NACCIMA. He emphasized the need for a more predictable policy environment to support economic stability and discourage dollarization.

In response, the CBN defended its actions, citing the need to curb inflation, which currently stands at a 33.69% high, the highest in 28 years. The apex bank’s recent increase of 600 basis points in benchmark interest rates aims to tighten monetary policy and stabilize the exchange rate, despite mixed reactions from economic stakeholders.

Looking ahead, the debate over the impact of these measures on inflation and economic stability continues. With the naira’s volatility shaping fiscal policies, stakeholders call for more coordinated efforts to mitigate adverse effects on businesses and consumers alike.