The upward adjustment of the exchange rate for import duty by the Federal Government last week caused apprehension in the country’s maritime sector. In this piece, ANOZIE EGOLE examines the impact of the over 40 per cent hike in the exchange rate for the computation of import duty
A customs agent with over 10 years of experience, Mr Johnpaul Ejiogu, has lamented current happenings in the maritime sector.
He mentioned that he used to earn a decent income from the industry, but now things have taken a turn for the worse. Johnpaul was already contemplating quitting the freight forwarding business because it could no longer sustain him and his family.
“I have never witnessed this kind of situation for close to 10 years that I have been in this industry. I have never seen a situation where the exchange rate for cargo clearance would keep increasing almost every 24 hours with no hope of the rate coming down,” he lamented to our correspondent.
The Federal Government through the Central Bank of Nigeria penultimate Friday raised the exchange rate for cargo clearance from N952/$ to 1,356/$. And in less than 24 hours after, it readjusted the exchange rate for cargo clearance to 1,413/$ on Saturday. This is coming weeks after the cargo clearance rate was increased from 783/$ to 952/$.
Amid importers and agents grappling with the new exchange rate for cargo clearance, the CBN announced another upward review to 1.417/$ on Saturday. This marks the third adjustment made by the apex bank this year to the exchange rate used for computing import duties.
The CBN had on June 14 unified the different segments of the country’s forex market, causing the local currency to depreciate by 36.56 per cent to 632.77/$ from 463.38/$ on June 9 at the Nigerian Foreign Exchange Market, according to data obtained from the apex bank.
The naira has weakened forward to 1,418.14/$ on Tuesday, as the CBN has been trying different measures to address the country’s lingering dollar scarcity.
In November, the exchange rate for cargo clearance was adjusted by 3.4 per cent from 757/$ to 783/$ and readjusted to 952/$ in December.
The depreciation of the naira has caused a significant rise in the prices of most commodities in the country, as inflation accelerated to 28.92 per cent in December from 28.20 per cent in the previous month.
Consequently, there has been a significant drop in imports and the number of abandoned and over time cargoes littering at different ports and terminals around the country have shot up.
The Nigerian Customs Service in its first half 2023 report said that there was about 4.5 per cent drop in revenue collection, which stakeholders linked to the about 70 per cent drop in vehicle importation into the country, global trade disruption, the flotation of the exchange rate, and other factors.
In a document that The PUNH exclusively obtained showed that customs raked in N1.3tn in the first six months of 2023, compared with N1.4tn revenue it collected in the corresponding period of the previous year.
The Nigeria Ports Authority recently disclosed that the Lagos and Tincan Island Port Complexes and the Terminals, including Ikorodu Lighter Terminal, had 3,200 units of overtime cars and about 3,295 units of overtime containers, while the eastern ports had a combined total of 956 overtime containers.
In separate chats with The PUNCH, maritime stakeholders noted that the over 40 per cent upward review of the exchange rate for cargo clearance would hurt the prices of imported products.
The Chief Executive Officer of the Center for the Promotion of Private Enterprises, Dr Muda Yusuf, in a chat with our correspondent, maintained that the situation would have a devastating effect on businesses.
“The drastic upward review of the exchange rate for the computation of import duty from 952/$ to 1, 357/$ would have a devastating effect on businesses across all sectors. This is a whopping 42.5 per cent increase. This is like the last straw,” he explained.
Muda added that businesses were yet to recover from the shocks of the new round of currency devaluation resulting from the sudden unification of the exchange rate, which had driven the official exchange rate to over N,1400.
“It is double jeopardy for the investors across all sectors, especially those in the real sector. This action will further fuel inflation as production and operating costs escalate. The vulnerable segments of the population will be further impoverished as cost-push inflation gets exacerbated.
“The shocks, disruptions, and dislocations were of immense proportions. It is even worse than the rates that took immediate effect. This is a policy action that is difficult to justify, especially in the context of the multidimensional headwinds that businesses were grappling with,” Muda declared.
Also, the founder of the National Council of Managing Directors of Licensed Customs Agents, Mr Lucky Amiwero, said the increase in the exchange rate for cargo clearance would affect every commodity imported into the country.
He said that the new exchange rate would increase the level of poverty in the country.
“The rate of poverty is going to be extremely terrible. In the next three to five months, you would see that there would be a gradual cut-off of the people; they can’t access money or anything.
“When you are thinking of moving the exchange rate to that level, it is going to affect every other thing because Nigeria is predominantly an import-dependent country and every commodity that is imported would be affected. So, this is a serious matter,” Amiwero narrated.
He lamented that with the new exchange rate the government was moving many people into poverty at a very high speed.
“That means that the government is moving people into poverty at a very high rate. Many people would be moving into the unemployed market. The country is becoming very terribly,” he declared.
The President of the Shippers Association of Lagos State, Leo Ogamba, raised concern that upward adjustment of the exchange rate for the computation of import duty would trigger inflation to accelerate at a faster pace.
“It is going to be difficult because no shipper/importer would sell below landing costs. So, the government should be mindful of this the rate of inflation is determined at the ports. Because at the end of the day, the importer would calculate the landing costs and add his profit.
The Nigerian Bureau of Statistics said we had more exports in 2023 why has that not been reflected in the exchange rate,” he said.
The youth leader of the Tincan Island Chapter of the Association of Nigerian Licensed Customs Agents and Chief Executive Officer of Sikremaster Logistics Limited, Remilekun Sikiru, said the increase in the exchange rate would also lead to an increase in the price of cars and other households.
“The prices of general cargoes would also increase. When I say general cargo, I mean every other thing, including chemicals, electronics, and other households.
“Any goods that are not contraband would be affected because the exchange rate is what determines the duty you would pay. It would affect the importers and the people who are selling those goods because the prices would go up.
“How do we explain this? From 952/$ to 1,356/$ as of Friday morning with about N404 increase? It is quite unfortunate that the prices of goods and commodities will automatically increase. Importation would further decrease; vehicle prices would skyrocket again,” he noted.
According to Sikiru, since the unification of the exchange rate, the government has refused to look inward and critically into the maritime industry as regards importation and exportation.
“The sector has been neglected and things are getting worse daily. The question now is, how freight forwarders and licensed customs agents would cope with this new rate?” he wondered.
Also, an agent, Ben Anya, explained that the latest increase in the exchange rate would raise the clearing cost.
“And this would also affect the cost of goods in the market. It would also lead to a drop in importation,” he postulated.
Meanwhile, the Secretary-General of Lagos State Car Dealers Association, Mr Tai Olanirun, projected that there would be over 40 per cent increase in the prices of vehicles due to the exchange rate adjustment.
He also said that many people would dump the business for other professions.
“To be sincere, no one would hike the price of cars again, because if you raise the prices, who will buy it, when everyone is looking for money to feed? The only thing is that most people would go out of business and others would diversify.
“Imagine the percentage increase. It would affect everybody. We can’t buy dollars and we are not getting it from the banks, we source for it. This means more people would continue to steal.
The price of Nigerian used cars will also go up. It will lead to more than 40 per cent increase in the prices of cars,” he remarked.
The Manager of Chimex Motors, Mr Nonso Amaraiwu, corroborated Olanirun’s claim, saying, “The new rate would lead to an increase in the price of cars. It will lead to a more than 40 per cent increase in the prices of cars now. And it would make cars, especially tokunbo, scarce. Already, tokunbo cars don’t come in the way it is used to come in. Ships don’t come in like that again, and this is affecting our businesses,” he averred.
Stakeholders have appealed to the apex bank to reconsider the upward review of the exchange rate for cargo clearance to bring succor to the already distressed sector.
The CPPE boss urged the CBN to reverse the rate hike in the interest of “the already impoverished segments of our society and the numerous businesses that were already on the verge of collapse”.
Muda recommended that going forward the determination of the exchange rate for import duty computation should be treated as a fiscal policy matter and located within the remit of the fiscal authorities, which is the finance ministry.
According to him, this is necessary for proper alignment with extant fiscal policies.
Experts also stressed the need for the government to involve the stakeholders in different sectors before making some decisions.
Amiwero said, “I think at this time, the government should look back and do what is right because it is not telling good for the country. The middle class is moving back to the lower class.”
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