Impending Factory Shutdowns, Revenue Decline as Import Duty Soars, Warns Local Think Tank

In a recent report by the Centre for Promotion of Private Enterprise (CPPE), concerns are raised over the looming threat of factory shutdowns and a decline in revenue for the Nigeria Customs Service. The report highlights the increasing challenges faced by industries dependent on imported raw materials, attributing the risk to the soaring import duty.

The Central Bank of Nigeria’s decision to raise the exchange rate for cargo clearance from N783/dollar to N952/dollar is cited as a major factor exacerbating the situation. Clearing agents and importers predict a negative impact on the maritime sector, already grappling with a challenging business climate.

Dr. Muda Yusuf, CEO of CPPE, emphasized in the report that the elevated exchange rate for cargo clearance serves as a significant incentive for smuggling. The report predicts potential shutdowns of industries reliant on imported raw materials and a decline in Customs revenue due to the growing difficulty of imports through official channels.

Muda Yusuf expressed concern that the continuous adjustments in exchange rates worsen the already prohibitive production and operating costs for businesses in Nigeria. The report underscores the detrimental effects on inflation, poverty levels, and corruption vulnerabilities in the international trade ecosystem.

According to the CPPE report, the situation is expected to inflict further pain on citizens, erode profit margins, reduce purchasing power, and elevate the risk to business survival. The report calls attention to the uncertainty faced by investors and the unpredictability of the international trade process due to frequent changes in exchange rates.

In light of these challenges, the CPPE appeals to the Central Bank of Nigeria and the Coordinating Minister of the Economy to reconsider the exchange rate increase. The report suggests a concessionary rate for import duty computation to protect the economy and citizens from unbearable inflationary pressures. CPPE recommends that the Customs duty rate be fixed at 20% less than the official exchange rate, considering the prevailing harsh economic conditions, and advocates for a reduction in the frequency of rate reviews to minimize uncertainty and risk for investors.