CBN duty forex hike: Expert warns against looming cargo diversion
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Lagos Ports Complex, Apapa.
A trade and supply chain expert has warned of looming massive diversion of Nigeria-bound cargo to neighbouring African countries over the arbitrary and seemingly uncontrolled hike in foreign exchange rate for import duty payment by the Central Bank of Nigeria CBN, insisting that the country would be the ultimate loser in the end.
Recall that Nigeria’s apex bank, the CBN had since November last year, effected an upward adjustment of foreign exchange rate for import duty, which currently stands at N1,444.56/$ several times, a development trade experts say might not be unconnected with Federal Government’s bid to hike duty on imported products to enable the Nigeria Customs Service meet its N1trillion revenue projection for the 2024 fiscal year.
Speaking with our correspondent in Lagos at the weekend, the supply chain expert, who pleaded anonymity, noted that the international trading public was just beginning to build confidence in Nigeria’s port systems following the introduction of some reforms that have brought a level of efficiency at the seaports, coupled with a relatively stable duty foreign exchange rate over the few years.
He however expressed fears that the trading community might begin to route their shipments through African neighbours, especially Togo and Republic of Benin, where the duty rates are more stable and ferry the same consignments into the country under various guises, especially given the porous nature of Nigeria’s land borders.
“Nigeria’s seaports are just recovering from over two decades of massive cargo diversion through which the country lost several trillions of naira in trade revenue. The direct implication of this erratic import duty forex hike is that the importers will pay higher duty in Nigeria for goods as compared to what is paid on the same goods when shipped through Togo or Benin Republic and the natural response of a trader is to go places where the duty is lower in order to guarantee profitability.
“I hope the management team of the CBN is conscious of what it is doing to trade in the country by these arbitrary hikes in forex duty rates, which ordinarily should be determined by the forces of demand and supply. Apart from the looming cargo diversion, the country would also risk higher inflationary trends, which would further pauperise the citizens and force many organisations to close shop”, the expert further warned.
Available data shows that from the second half of last year, beginning from June 24, 2023, the CBN increased the foreign exchange rate from N422.30/$ to N589/$, which was further increased to N770.88/$. This particular hike sparked off protests among clearing agents, who threatened to shut the seaports.
Again, records show that on November 14, 2023, the rate was increased to N783.174/$, while in December, 2023, the rate was also hiked to N951.941/$. In this month alone, it has been increased several times, as it was adjusted on February 2, 2024 to N1, 356.883/$ and within 24 hours, (precisely February 3), it was hiked to N1, 413.62/$, increased again to N1,417.635/$ on Saturday and further hiked to N1,444.56/$1 today, Monday February 12, 2024.
He further argued that the federal government ought to have learnt a lot of lessons from the hasty removal of subsidy on petroleum products, which has brought about unprecedented hardship on the citizens occasioned by high transport cost, worsening food and other headline inflation, thus worsening the spate of insecurity in the country.
“Governance is not all about increasing government revenue even at the expense of the citizenry, but policies should be thought through in terms of their long, medium and long term effects on the country and its citizens. This arbitrary hike for import duty forex rate would definitely bring about regrettable long term effects on the economy because the cargoes would be diverted through neighbouring seaports and later find their ways into the country without any revenue to the government”, he also said.
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