The exchange rate for duty collections by the Nigerian Customs Service (NCS) has dropped from N1,500/$ to N1,481 representing a decline of N19 following the appreciation of the naira on the official market.
However, the foreign exchange (FX) rate for customs duty collections still stands above the official exchange rate on the NAFEM window.
Nairametrics had earlier reported that the Naira had appreciated to N1,468.99 to the USD on the official NAFEM window on Monday.
This represents a 1.93% appreciation when compared with the closing rate of the Naira to the USD as of last Friday (May 17) where the Naira stood at N1,497/$.
Reasons for appreciation
The appreciation of the naira starting the new week comes amidst a rise in the country’s foreign reserves in the last month and increased liquidity in the foreign exchange market as recorded by the NAFEM.
The rise in forex turnover to $161.41 million, a 93.31% increase from the $83.5 million recorded on Friday, likely contributed to this appreciation. This increase in market liquidity follows a significant drop in daily forex market turnover, which saw a steep 69.4% decline between Thursday, May 16, and Friday, May 17, 2024. The turnover amount on Friday was the lowest since January 20, 2024. Monday’s trading dynamics further highlighted the market’s erratic nature.
Nigeria’s foreign exchange (FX) reserves have increased by approximately $535 million over the past 28 days. According to the Central Bank of Nigeria (CBN), the FX reserves grew from $32.107 billion on April 19, 2024, to $32.642 billion by May 16, 2024. This growth bolsters the country’s external reserves, which are essential for stabilizing the naira and supporting the economy.
Drop in diaspora remittances
The CBN recently implemented plans to double foreign-currency remittance flows through formal channels by granting Approval-in-Principle (AIP) to 14 new international money transfer operators (IMTOs). This move came amid a decline in diaspora remittances by Nigerians in the first three months of the year.
- In the first quarter (Q1) of 2024, Nigeria recorded a total of $282.61 million in direct FX remittances. This represents a decrease of $18.96 million, or 6.28%, compared to the $301.57 million received in diaspora remittances during Q1 2023.
- Following the depreciation of the naira to N1,533/$, the Nigerian Customs Service (NCS) raised the exchange rate for import duty collections by N38, from N1,492/$ to N1,530/$.
- In light of the lack of stability in the customs duty set by the CBN, the Centre for the Promotion of Private Enterprise (CPPE) wants the NCS to adopt a specific quarterly exchange rate for import duty collection as a measure towards addressing the problems associated with frequent changes in the customs exchange rate and general volatility of the foreign exchange market. The centre recommended setting the import duty rate at N1,000/$ moving forward.