For the first time, the Nigeria Customs Service (NCS) raised the import duty exchange twice within 24 hours on Friday under the guise of “obeying” the Central Bank of Nigeria’s (CBN) directive. The unusual adjustment raised the going duties across commodity lines by 48.5 per cent in less than two days.
Recall that NCS adjusted the rate from N951.94/$ to N1356.8/$ on Friday. While the market was yet to fully digest the decision, it was raised further by over four per cent on Saturday, to the current N1,413.6 to a dollar.
In a swift response, the NCS said the service is simply adhering to the official market as directed by the Central Bank of Nigeria (CBN).
Since President Bola Ahmed Tinubu came into office, the import duty determination rate has been increased by 235 per cent. It stood at N422.3/$ as of May 29, 2023, when the administration was inaugurated.
With the liberalisation of the FX market, naira saw a sharp depreciation last June, forcing NCS to also adjust the rate used for duty assessment. Since then, the Customs rate mimics the spot segment of the FX market, explaining it is not a decision it has control over.
The service has ignored calls for the adoption of the average rate as opposed to the spot rate. Those who have advocated average rate adoption have argued that the option would make more sense for the predictability and stability of prices.
With spot rate adoption, the Customs has left importers guessing what the next day’s duty could be – a situation economists said could worsen the inflation, increase the cost of living and raise the poverty index.
The fresh increase has already triggered a negative response in the prices of goods, including staple food. At the weekend, The Guardian learnt, the prices of many imported items were hurriedly adjusted. A list of cosmetics items sighted by our correspondent added about 18 to 25 per cent across the prices.
Some products that sold for N2,200 per unit were adjusted to N2,600, while the dealer explained that he would pay more to clear his goods, hence he had to make provision for the upward movement of the replacement cost.
There are fears that the prices of rice, a staple food consumed by many Nigerian households, could see a further sharp rise in the coming days following the increase.
As at last May, a bag of 50 kilogramme of rice sold for about N38 but soared by close to 100 per cent to N70,000 at the close of the year, following the hike in prices of fuel and importation. Traders said Nigeria should expect the essential item to hit N100,000 sooner than expected as the rising cost of import feeds into general prices.
An average Nigerian faces tough times in the face of the rising cost of importation. Last year, as in the case of previous ones, the five top imports by value were motor spirit, gas oil, wheat, sugar and used vehicles. Whereas naira depreciation means the subsidy cover for the motor spirit would expand drastically, Nigerians would face the direct consequence of spending more on wheat, sugar and used vehicle purchases.
Already, prices of vehicles have hit the roof with the cheapest cars (1990s sedans) selling for between N3.5 million and N4.5 million even before last week’s duty review. The least cost of clearing, as at the weekend, according to information sourced from clearing agents, was N2.4 million. A car dealer told The Guardian yesterday that he had increased asking prices of the vehicles at his shop on Saturday following the announcement of the new duty.
Last year, the value of used vehicles, which accounted for 1.64 per cent of the total import, was N135.82 billion. As duties went up last year, the number of cleared vehicles dipped by 32 per cent to 132,296 units, leaving thousands of units at the ports accumulating demurrages. This suggests that the government would need to find a way to manage rising abandoned vehicles this year even as duty cost doubles or triples.
