Home Business Cost of clearing imported goods up 93% after forex reforms

Cost of clearing imported goods up 93% after forex reforms

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The depreciation of the Nigerian naira against the US dollar has significantly impacted customs duties, leading to an approximate 93 percent increase since the federal government’s foreign exchange reform eight months ago.

This surge in customs duty, primarily due to the weakening naira, has escalated the cost of clearing imported goods, exerting additional pressure on businesses already grappling with economic challenges.

As of Monday, the naira’s value had sharply declined, crossing the N1,000 mark against the dollar in the official market back in December 2023 and reaching N1,900/$ in the parallel market and N1,506.352/$ in the official market. The Nigeria Customs Service, aligning with the Central Bank of Nigeria’s official foreign exchange rate, has subsequently raised the tariffs for clearing imported goods at ports.

Since the FX reforms, the increase in import tariffs, calculated based on the high exchange rate, stands at 86.8 percent, and there has been a 51.3 percent rise since January 2024.

This situation means that importers and manufacturers now incur higher costs to clear their goods. Tony Anakebe, a licensed customs agent, illustrates the impact: a 40-foot container of pharmaceuticals, cleared last year for N7 million when the customs duty exchange rate was N422.30$, now costs N25 million to clear.

Similarly, the clearing cost for a 20-foot container has risen from N5 million to N12 million, contributing to the high prices of medicines.

Reduced import volumes and increased prices are strategies importers are adopting to manage these escalating costs. Another importer, Akinto (@Onyeka01), shared that the cost to clear a 40-foot container at Onne Port has risen from N7 million in August 2022 to N18 million.

These elevated clearing costs inevitably translate into higher retail prices for finished products, exacerbating the strain on consumers in a nation heavily reliant on imports, amidst declining purchasing power and rising inflation.

Kingsley Igwe, national secretary of the National Association of Government Approved Freight Forwarders, criticized the Central Bank’s policy allowing fluctuating exchange rates for cargo clearing, given its detrimental economic impact.

He advocated for practices like hedging or benchmarking rates at a specific threshold, as seen in other countries, to mitigate such effects on businesses.

Igwe attributed the adoption of fluctuating FX rates by Customs to the government’s revenue targets, arguing that Customs, traditionally a trade-facilitating and duty-collecting agency, has been compelled to find ways to meet these targets, especially in the wake of decreased trade volumes post-COVID-19.

To address these challenges, the CBN recently approved using the exchange rate at the time of submitting Form M for calculating import duty. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, welcomed this decision but noted that it does not fully address the high costs of clearing goods, which have significantly contributed to inflation and jeopardized maritime sector jobs.

Yusuf proposed pegging the FX rate for paying Customs duty at N1,000 to the dollar as a potential relief measure.

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