Duty exchange rate palaver: CBN directs Customs to use closing rate on ‘Form M’ opening date

By Enyeribe Anyanwu

The Central Bank of Nigeria (CBN) has asked the Nigeria Customs Service (NCS) to use the closing forex rate on the date the ‘Form M’ was opened to calculate duty payable on the imported goods.

The apex bank’s advice came in response to the outcry and complaints by importers following frequent and irregular changes in the import duty rates applied by the Nigeria Customs Service in duty assessment. The new directive is to take effect from February 26, 2024.

The CBN, in a circular dated February 23, 2024, admitted that the arbitrary increases in the forex rate used to compute Customs duty have created uncertainties around the pricing structure of goods and services in the country, thereby creating “abnormal increases” in the prices of goods in the country.

“Following the liberalisation of the FX market on Willing Buyer-Willing Seller trading principle, the Central Bank of Nigeria has noted the concerns of Importers of goods and services in the irregular changes in the Import Duty Assessment levies applied by the Nigeria Custom Service

“These developments have further built uncertainties around the pricing structure of goods and services in the economy and creating abnormal increases in the final sale prices of items, which is largely driven by uncertainties, rather than traditional market fundamentals, with implications to near term inflation trends.

“To this effect, the Central Bank of Nigeria wishes to advise that the Nigeria Custom Service and other related Parties adopt the closing FX rate on the date of opening Form M for the importation of goods, as the FX rate to be used for Import Duty Assessment. This rate remains valid until the date of termination of the importation and clearance of goods by importers,” the apex bank said in the circular signed by the Director of Trade and Exchange Department, Hassan Mahmud. The circular further stated:

“This would enable the Nigeria Custom Service and the importers to effectively plan appropriately and reduce the uncertainties around varying daily exchange rate in determining their revenue or cost structure, respectively

“Therefore, effective 26 February 2024, the closing rate on the date of opening of Form M for the importation of goods and services would be the rates that would apply for the assessment of import duty. This supersedes the requirements of Memorandum 9, J (2) of the Central Bank of Nigeria Foreign Exchange Manual. (Revised Edition), 2018.”

The CBN said while it is mindful of the initial volatility and price distortions in the aftermath of the forex market liberalisation, it is confident that these reforms, would in the medium term, ensure stability in the market and entrench market confidence necessary to attract investment capital for the growth and development of the Nigerian economy.

The volatility in the customs duty exchange rate had been unprecedented in the last two months engendering public outcry especially from importers and the business community, and creating confusion for Customs.

Since January this year, the Service has adjusted the forex rate almost twice weekly. This has caused chaos at customs clearance points, and led to abandonment of imported cargoes at the ports.