The Nigeria Customs Service (NCS) recently increased the exchange rate for import duties to N1508 for every dollar. This is the highest rate in the past three months. Back on March 21, 2024, the rate was N1,572 for every dollar.
This new rate is N38 more than the previous one, which was N1470 for every dollar.
The increase shows that the naira, Nigeria’s currency, has weakened compared to the dollar. This happened even though June was a calm month for the foreign exchange (FX) market.
Calm FX Market in June
In June, the FX market was more stable. The exchange rate changed between N1,473 and N1,510 and ended the month at N1,505.30 for every dollar. This means the naira lost 1.3% in value that month.
This stability in June suggests that changes made by the Central Bank of Nigeria (CBN) might be working. The CBN governor, Yemi Cardoso, said in an interview that Nigerians have likely seen the worst of the exchange rate changes.
He said, “We are pleased with how far we’ve come. After a time of instability, we now see more stability in the market.”
“There have been small changes in the currency. Rates have been combined. This is good for businesses to plan and helps attract investors to our economy.”
“I believe we have seen the worst of the instability.”
In the first half of 2024, the CBN raised the Monetary Policy Rate (MPR) by 750 basis points. This was done to control inflation and attract foreign investors.
As a result, foreign investments grew to $2.07 billion in the first quarter of the year, the highest since the first quarter of 2020.
Also, total capital imports in the quarter rose to $3.37 billion, the highest since the first quarter of 2020.
Impact of the High FX Rate for Import Duties
The rising exchange rate for import duties makes things harder for importers and businesses. It increases the cost of bringing goods into the country and makes inflation worse.
The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms said that the FX rate for import duties would be fixed at N800 for each dollar, according to the 2024 budget. However, this has not yet happened.