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Lawmakers to CBN: Maintain Exchange Rate Below N1,000/$1 For Customs, Excise Duties

The House of Representatives on Thursday urged the Central Bank of Nigeria (CBN) to maintain the system exchange rate for customs duty and excise duty purposes below N1,000/$1.

The lawmakers said it should be preferably N951.941/$1 to encourage patronage in Nigerian ports to prevent galloping inflation, and aim to balance economic stability as well as competitiveness in the global.

It also urged the Federal Ministry of Finance and CBN to provide adequate notice to stakeholders in the maritime industry and the general public before altering the customs exchange rate.

The House said that this will ensure transparency and allow stakeholders to prepare for any changes that may affect their operations.

The House further urged the federal ministry of finance to ensure the international best practices of allowing a 90-day grace period for fiscal policy changes to facilitate the completion of ongoing transactions under existing policies.

These resolutions followed the adoption of a motion on the “Need to Rescue the Nigerian Economy from imminent Collapse and Restore Investors’ Confidence in the System” moved by Hon. Leke Abejide at plenary.

Presenting the motion,  Abejide noted that conventional fiscal policies require a minimum of 90 days to manifest, in contrast to the current trend in Nigeria where immediate enforcement is prevalent.

He stated that this necessitates the need for a shift towards a collaborative approach which integrates fiscal and monetary policies with stakeholder’s engagement to prevent isolation and guarantee active stakeholders’’ involvement in consequential decisions.

He also noted that the CBN has raised customs tariffs six times in the past six months, causing inflation and disrupting import and excise duty calculations, which businesses rely on for business planning.

The lawmaker recalled that businesses and investors rely on a stable transactional exchange rate for import and excise duty calculations for at least two years to enable effective business planning.

“The CBN experienced a series of exchange rate adjustments for customs duties within six months. On 24 June, 2023, the rate increased from N422.30/$1 to N589/$1, followed by N770.88/$1 on July 6, 2023.

“It was N783.174/$1on November 14, 2023, N951.941/$1 on December 7, 2023, and a double adjustment on February 2 and 3, 2024, reaching N1,356.833/$1 and N1,413.62/$1 respectively, illustrating excessive fluctuations and volatility in the currency market, raising significant concerns about business planning and economic stability,” he stated.

Abejide further stressed that due to the frequent customs exchange rate hikes, Nigerian importers were shifting towards ports in Tema, Ghana; Lome, Togo, and Cotonou, Benin Republic.

According to him, this is causing a substantial 65 percent decrease in cargo importation and business activities at Nigerian seaports, with daily container examinations dropping from approximately 250 to just about 80.

“The current system in Nigeria which relies on a market-based exchange rate for calculating customs duties causes fluctuations based on market conditions, and poses significant predictability and stability challenges for businesses.

“This necessitates alternative solutions for customs duties by considering options like a fixed-rate system or a hybrid system combining market based and fixed elements to enhance predictability and stability,” he argued.

However, the House mandated its Committees of Customs and Excise, Finance and Banking Regulations to interface with the Minister of Finance, the apex bank Governor and Comptroller General of the Nigeria Customs.

It stated that this would focus on how to fix exchange rate for customs and excise duties and how it will work for the system to boost exports and encourage patronage in the nation’s ports.

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