The Nigeria’s House of Representatives on Thursday, called on the Central Bank of Nigeria to keep the system exchange rate preferably at N951.94/$1 to encourage patronage in Nigerian ports and control prices of goods and services.
The House resolution was sequel to the adoption of a motion on the “Need to rescue the Nigerian economy from imminent collapse and restore investors’ confidence in the system,” brought on the floor of the House of Representatives on Thursday by member representing Yagba East/Yagba West/Mopamuro Federal Constituency, Kogi State, Mr Leke Abejide.
In his lead debate, the African Democratic Congress chieftain noted that “The conventional fiscal policies require a minimum of 90 days to manifest, in contrast to the current trend in Nigeria where immediate enforcement is prevalent, thus necessitating 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 stressed 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.
He said, “The House is aware 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 House is “Alarmed that the Central bank of Nigeria experienced a series of exchange rate adjustments for customs duties within six months, in 24 June, 2023, the rate increased from N422.30/$1 to N589/$1, followed by N770.88/$1 on July 6, 2023, N783.174/$1, on November 14, 2023. N951.941/S1 on December 7, 2023, and a double-adjustment on February 2 and 3, 2024, reaching N1,356.833/$1 and N1,413.62/S1 respectively, illustrating excessive fluctuations and volatility in the currency market, raising significant concerns about business planning and economic stability.”
He added that lawmakers are worried that due to the frequent customs exchange rate hikes, “Nigerian importers are shifting towards ports in Tema, Ghana, Lome, Togo; and Cotonou, Benin Republic, causing a substantial 65 per cent decrease in cargo importation and business activities at Nigerian seaports, with daily container examinations dropping from approximately 250 to just about 80.”
The Kogi lawmaker further expressed concern that 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, thus necessitating 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.”
Consequently, the lawmakers urged the CBN to “maintain the system exchange rate for customs and excise duty purposes below N1.000/S1 preferably N951.941/$1 to encourage patronage in Nigerian ports to prevent galloping inflation, aiming to balance economic stability with competitiveness in the global economy,” even as it called on the Federal Ministry of Finance and apex bank to “Provide adequate notice to stakeholders in the maritime industry and the general public before altering customs exchange rates. This ensures transparency and allows stakeholders to prepare for any changes that may affect their operations.”
It also called on the Finance Ministry to implement the international best practice of allowing a 90-Day grace period for fiscal policy changes to facilitate the completion of ongoing transactions under existing policies.
Consequently, the House mandated the Committees of Customs and Excise, Finance and Banking Regulations to interface with the Minister of Finance, the CBN Governor and Comptroller General of the Nigeria Customs on how fixed exchange rate for Customs and Excise duties will work for the system to boost exports and encourage patronage in the nation’s ports.
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