With the ongoing fluctuations in foreign exchange rates, Nigerian manufacturers and importers are facing a steep 23% rise in their import clearance charges. This spike in costs is directly linked to the recent enforcement of the 2023 Customs Act, which now allows the Central Bank of Nigeria (CBN) to determine the Import Duty rate based on the current exchange rate. The fluctuating exchange rates in the foreign exchange market continued to affect the expenses associated with clearing imported goods under the new policy.
The price for clearing imports skyrocketed by 23 percent within just 16 days, climbing from ₦1,150.16/$ on April 23, 2024, to ₦1,412.6/$ by May 8, 2024. This surge represented a significant 48 percent increase compared to the exchange rate of ₦951.941/$ in January 2024. Earlier this year, the CBN recommended to the Nigeria Customs Service (NCS) that they use the final foreign exchange rate from the official window for calculating import duties in order to address complaints about frequent fluctuations.
Rate of import clearance rose by 4.5% in February 2024.
Effective as of February 26, 2024, this circular replaces the prior directives set forth by the Central Bank of Nigeria. On February 21, 2024, the CBN increased the Customs duty rate for clearing imported goods by 4.5% to ₦1,605.82/$, marking the highest rate seen in Nigeria’s port industry since the FX reforms of June 2023. In April 2024, the Naira saw a boost in its value attributed to reforms by the Central Bank of Nigeria. These reforms helped to strengthen the Naira against the dollar amidst a rise in the supply of greenbacks. This welcomed respite for importers burdened by steep clearing expenses at the ports.
During an interview, Jonathan Nicole, the ex-president of the Shippers Association of Lagos State, expressed concern about the inconsistent changes in import duty rates. He emphasized the difficulties importers and manufacturers were encountering in maintaining their investments. Nicole stated that due to the failures of our economic policies which is leading to inconsistencies in the import clearing rates, importers are choosing to either abandon their goods at ports or move to countries with more stable import policies. On March 13, 2024, the Central Bank of Nigeria made the decision to lower the exchange rate used for determining Customs duties at ports in Nigeria by 0.76%.
NCS raised import date by ₦127.36 between April 23 and 25.
This adjustment is in response to the strengthening of the naira compared to the dollar on March 12, 2024. The naira experienced a 0.90% increase against the dollar due to a rise in FX supply at the official foreign exchange market. Meanwhile, toward the end of April 2024, the Nigeria Customs Service reported an 11.0% increase in the exchange rate for import duties collection, jumping from ₦1150/$ to ₦1277.52/$ by the end of the month as per the customs exchange rate window update. This indicates an increase of ₦127.36 between April 23 and 25, 2024.
As per the Central Bank of Nigeria’s directive, the exchange rate specified on the Form M application would be utilized for duty calculation purposes. The Nigerian Customs Service works closely with the CBN to ensure that the exchange rate is regularly updated to reflect the official market rate on the Nigerian Autonomous Foreign Exchange Market (NAFEM) window, resulting in frequent rate adjustments. There has been a consistent rise in the exchange rate used for collecting customs import duties due to the depreciation of the Naira.
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Yemi Cardoso, the CBN Governor, has been emphasizing the positive effects of his reforms on the foreign exchange market in recent weeks. He pointed to a report by Goldman Sachs that named the naira as the top-performing currency globally over the last month. Additionally, he mentioned that the central bank has transitioned from reactive measures to proactive strategic planning in various important sectors. The naira’s recent loss in value is a crucial indicator of whether the CBN’s recent reforms, such as selling FX to Bureau de Change at rates lower than the official market rate and cracking down on Binance and similar entities, are viable in the long run to guarantee a conducive business environment.