CBN Directs Customs: Use Form M Exchange Rate for Import Duty Calculation.

In a recent directive, the Central Bank of Nigeria (CBN) has instructed the Nigerian Customs Service (NCS) to adopt the foreign Exchange (FX) closing rate on the date of ‘Form M’ submission by importers for the assessment of import duties and clearance of goods. This proactive step is aimed at addressing the challenges posed by the volatile foreign exchange market and the frequent updates on customs duties rates.

According to Hassan Mahmud, Director of the CBN’s Trade and Exchange Department, the fluctuating customs duties rates have been disrupting pricing structures, leading to irregular increases in the final cost of goods in the market.

The CBN emphasized the importance of stability and predictability in import duty assessments, stating, “Effective from February 26, 2024, the closing rate on the date of Form M submission will be used for the assessment of goods and services, superseding the previous requirement outlined in Memorandum 9, J (2) of the Central Bank of Nigeria Foreign Exchange Manual (Revised Edition) 2018.”

This measure aims to provide clarity and certainty for both the Nigeria Customs Service and importers, enabling them to plan effectively and mitigate uncertainties arising from fluctuating exchange rates during the importation and clearance process.

Background Context: The Nigeria Customs Service, in collaboration with the CBN, has been regularly adjusting exchange rates for import duties and clearance of goods on its website since the unification of the forex market in June. This adjustment has been occurring almost twice weekly since the beginning of the year.

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In response to concerns raised by the public and the business community, the Comptroller-General of the NCS clarified that the service follows the directives of the CBN regarding exchange rate adjustments.

The most recent adjustment reported by Nairametrics saw the exchange rate increase from N1537.07 to N1605.82 per USD.

Insights: The CBN unified the foreign exchange market in June 2023, resulting in the depreciation of the naira by over 100% on the official window. This, coupled with other fiscal policy measures such as the removal of fuel subsidies, contributed to a 28-year high in inflation, reaching 29.90% as of January. Notably, food and transportation sectors experienced significant inflation, with food inflation at 35.4% in January.

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