The exchange rate for Nigeria’s Customs duties collection has jumped by 23.9%. From May 30th, 2024, it increased from N1,196.6 per USD to N1,482.9/$ in just two days. This rise marks a significant change of N286.3.
The exchange rate for customs duties dropped initially after the Naira surprisingly strengthened on the official market to N1,173/$ on May 28th, 2024. This was a 14.09% increase, the largest one-day gain for the Naira since January 2024.
Volatility of the Naira
However, the Naira couldn’t maintain this momentum. The next day, it fell to N1,339/$ and closed the week at N1,485.9/$. This closing coincided with the end of a very volatile May for the Naira.
Challenges in 2024
The Naira’s turbulent 2024 is due to forex market supply issues. The Central Bank of Nigeria (CBN) has tried to stabilise the market through various policies. Yet, none have achieved a stable exchange rate since the year began.
CBN’s Latest Policy on Cash Pooling by IOCs
This week, the CBN issued a circular allowing International Oil Companies (IOCs) in Nigeria to sell 50% of their forex proceeds to authorized dealers or legitimate forex users. If an IOC doesn’t need the forex proceeds, it can sell them to authorized dealers.
This move aims to boost forex supply and provide stability. Earlier in February, the CBN had prevented IOCs from remitting all their forex proceeds, requiring them to keep 50% for 90 days—a policy known as cash pooling.
Impact on Nigerian Businesses
The forex market’s volatility has caused the Customs Service to change the exchange rate for duties collection frequently. This policy has caused significant discomfort for Nigerian businesses, especially importers.
N800/$ Pegged Customs Duties Rate
Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, recommended pegging the customs duties rate at N800/$. He argued this rate, which matches the 2024 budget, allows for long-term business planning and uniformity in government actions. The Customs Service stated that the frequent changes are due to the CBN’s unified exchange rate policy, as the apex bank sets the duties collection rate.
