Forex Rate: Manufacturers, Importers, Others Bemoan High Costs
Importers, clearing agents and manufactures have cried out over the high foreign exchange (forex) rate in the country.
It was in June, this year that the Central Bank of Nigeria (CBN) unified exchange rate windows to maintain Naira stability against foreign currencies, notably the United States Dollar but the policy, the stakeholder said, has not yielded the expected result because of the forex scarcity.
In a separate interviews at the weekend, the stakeholders urged the Central Bank of Nigeria (CBN) Governor, Dr. Olayemi Cardoso, to address the problem.
A maritime lawyer and analyst, Mr Muhammed Oluwaseyi, urged the CBN to stabilise the naira and grant concessional Forex allocation to importers and manufacturers for the importation of productive input that are not locally available.
His request comes even as other stakeholders in the maritime industry lament that the crisis of forex is affecting their businesses too. They also seek the government’s intervention in addressing the problem.
Muhammed noted that the manufacturing sector has come under a severe hit as a result of a shortage of foreign exchange required by manufacturers to import locally-unavailable raw materials and machinery.
For the survival of the manufacturing sector, the lawyer requested the Federal Government to grant concessional Forex allocation in sufficient volume at the official Forex market to manufacturers for the importation of productive inputs that are not available in the country.
Importers who spoke with our correspondent complained because the seaport is a major entry point for imported goods and transactions are mostly carried out in dollars.
Findings have shown that at the Tin Can Island Customs Command, there is continued drop in cargo throughput.
Its Area Controller, Dera Nnadi, lamented that the number of vehicles throughput into the command had continued to dwindle from 32,000 in 2018 to a mere 4,000 units in 2023.
A clearing agent, Mr Adesegun Ogunsanu, said this was so because import duty is calculated by summing up surface duty (percentage of CIF), surcharge, administrative charge (CISS), ECOWAS Trade Liberalisation Scheme (ETLS) and 7.5 percent value-added tax (VAT).
“Since the Nigeria Customs Service calculate import duty rate based on the official rate of the dollar at any given time, forex volatility has been affecting importers and businesses in the port fair in recent months,” Ogunsanu said.
Although, most of the importers, port users and buyers are ignorantly casting aspersions on the Customs because of the hike in the forex market. But they have forgotten that it is a monetary policy and anything monetary is not determined by the Service; it is determined by the Central Bank of Nigeria.
The National Public Relations Officer of Customs, Abdullahi Maiwada, said, the Customs, “as a government agency, we don’t deal with what the black market or parallel market says about the dollar. Customs calculate import duty based on official market rate which is the Investors’ and Exporters’ (I&E) window that the Central Bank of Nigeria (CBN) uses.
“Whatever you see in our system is what has been communicated to us by the CBN. It is determined by the Central Bank of Nigeria. It is a monetary policy. We only implement what is given to us. It is a monetary policy and anything monetary is not determined by Customs; it is determined by the CBN. We only use what is communicated to us to determine import duty of imported goods.”
Stakeholders said with major charges determined and calculated based on dollar rate, the cost of doing business at Nigerian ports will continue to soar if the naira continues to slide further down to the dollar.
“It is imperative that the new leadership of the CBN get things done rightly by restoring confidence in Nigeria’s forex market or the Nigerian ports will continue to rank as one of the costliest in sub-Saharan Africa,” said an importer, Mr Anthony Felix.
A member of Manufacturers Association of Nigeria (MAN) in Ogun State, Mr Bamidele Agbabiaka noted that: “forex crisis in which the Naira value depreciates among convertible currencies such as the US Dollars strangulates and reduces the size of manufacturing in the country.”
This, Agbabiaka said, “ is because depreciation in Naira value causes vehicle importation and manufacturing raw materials and machinery imports to be more expensive.”
The high cost of import bills for vehicle importation and the productive inputs, he said, decreases importers and manufacturing working capital and feeds into manufacturing commodities prices, thereby making the sector less competitive in the subregion.
“It is essential, therefore, that the available forex policies and guidelines should be appropriately reviewed by the current CBN Governor to support manufacturing, particularly during this ember months when more goods are expected to be shipped into the country through the ports. The issues of forex allocation to critical manufacturing should be looked into to ensure a production enabling Forex management for those in critical need,” he said.
Also, members of the national Association of small business owners in Nigeria (ASBON) have queried why the floating of the Naira has not effectively curbed speculative activities in the foreign exchange market.
A member of the group, Gbenga Aribisala expressed concerns over the grappling volatility of forex market and the attendant effects on Small and Medium Enterprises (SMEs), micro and nano businesses, a concern that was also raised by indigenous entrepreneurs who spoke with the paper.
Aribisala pointed out that the rising cost of production, driven by a reliance on imported inputs like equipment and raw materials, is a major factor contributing to the problem they are facing.
He urged the CBN Governor to move swiftly and address the harsh business environment faced by businesses and owners across the country.
Other members of the group attributed the collapse of the SMEs to a harsh business environment from high cost of operations, overhead cost, over-taxation, lack of access to funding, FX Market fluctuations and the inability of the government to tackle inflation.
