CBN Adjusts Customs Exchange Rate for Duty Collection to N1,327/$

The Central Bank of Nigeria (CBN) has raised the exchange rate for the Nigerian Customs Service’s duty collection by N163, bringing the new rate from N1,162/$ to N1,327/$. This adjustment, effective May 1, 2024, reflects the ongoing fluctuations in the Nigerian foreign exchange market and underscores the volatility that has been affecting the country’s currency.

The latest increase in the customs exchange rate comes amid the recent depreciation of the Naira in both official and parallel markets. This drop followed a period of relative stability during March and April when the Naira was lauded as the world’s best-performing currency. The new customs rate of N1,327/$ is now closer to the prevailing official market rate, which closed at N1,350/$ on Monday.

The depreciation of the Naira has led to a significant impact on the Nigerian economy, with customs duties being a critical source of government revenue. The changes in the customs exchange rate have caused ripple effects across various sectors, especially import and export industries.

Earlier reports highlighted that the customs exchange rate for duty collection had dropped significantly below the official market rate, leading to concerns about revenue loss and market distortions. However, the adjustment by the CBN suggests a move towards harmonizing rates and reducing discrepancies between official and customs rates.

Despite the CBN’s efforts to stabilize the foreign exchange market, challenges persist. The Economic and Financial Crimes Commission (EFCC) has been active in clamping down on currency speculators, leading to the freezing of over 1,000 accounts over allegations of illicit foreign exchange transactions. This crackdown resulted in a marginal appreciation of the Naira, but the effect was short-lived as the currency lost about a third of its value over the past week.

To counter these challenges, the CBN has implemented several measures, including selling $10,000 to Bureau de Change operators at just over N1,000 to the dollar, a rate below the official market, and capping the selling spread at 1.5% of the purchase price. Despite these efforts, achieving long-term stability remains an ongoing struggle.

Financial experts note that the CBN’s recent policies, including increasing the monetary policy rate by 600 basis points and offering treasury bills at rates exceeding 20%, demonstrate a commitment to stabilizing the exchange rate. However, the frequent updates to the customs FX rate indicate that stability in the Nigerian foreign exchange market remains an elusive goal.