The exchange rate for the Nigeria Customs duties collection has risen by 23.9% from N1,196.6 per USD to N1,482.9/$. This marks an increase of N286.3 in just 2 days from May 30th, 2024, when it dropped to the N1,196.6/$ rate.
The initial drop in the exchange rate for customs duties collection follows the surprise strengthening of the Naira on the official market to N1,173/$ on the 28th of May 2024. This marked a 14.09% increase, which is the largest one-day appreciation of the naira since January 2024.
Volatility of the naira
However, the naira failed to maintain the momentum and fell to N1,339/$ the next day following the surprised appreciation, and closed the week at N1,485.9 to the USD. The exchange rate for the close of work coincided with the end of May- a very volatile month for the naira.
The turbulent 2024 for the naira stems from the supply issues on the forex market. The Central Bank of Nigeria (CBN) has tried to bring stability to the forex market through a variety of policy initiatives. However, since the beginning of the year, it seems none has produced a lasting effect on a stable exchange rate.
CBN latest policy on cash pooling by IOCs
This week, the apex bank issued a circular permitting International Oil Companies (IOCs) operating in Nigeria to sell 50% of their forex proceeds to authorised dealers or legitimate users of forex. Furthermore, it stated that when an IOC does not have use for the forex proceeds, it could sell it to authorised dealers.
The move is part of efforts by the Central Bank to boost the supply of forex to the market and provide much-needed stability. The bank had earlier in February prevented IOCs from remitting 100% of their forex proceeds by asking them to keep 50% for 90 days- a policy known as cash pooling.
The volatility of the forex market has resulted in the Customs Service regularly changing the exchange rate for duties collection- a policy that has brought great discomfort to Nigerian businesses especially importers.
N800/$ pegged customs duties rate
The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele had recommended to the federal government that the customs duties rate be pegged at N800/$- the same rate in the 2024 budget. He argued that pegging the rate at N800/$ allows businesses to plan for long term and brings uniformity in government actions- as the 2024 budget cannot be operating separately from customs duties rate.
The Customs Service had earlier defended the regular changes in the market as due to the unified exchange rate policy of the CBN stating that it is the apex bank that fixes the rate for duties collection.
