Imports: How Customs Duties Exchange Rate Hikes Influence Higher Market Prices
WALE EDUN
By Francis Ugwoke
Many Nigerians are currently languishing in extreme poverty and this has in turn led to reactions from all parts of the country.
Perhaps, the problem started with the withdrawal of petroleum subsidy. The subsidy withdrawal as being feared over the years has come with pains of more transport costs which in turn led to rise in prices of goods in the market. But that was not all. The fall of Naira in value to other foreign currencies has been devastating for months now. The fall has been with speed. Early last year, the rate of Naira to Dollar was about N700/$1. Expectations were therefore that the new government would work out a way in which the exchange rate would come down. But instead of coming down, the dollar rate has kept rising to what it is now – over N1,900/$1. Observers hold the view that the Dollar can be said to have arrived at the doorstep of N2,000/$1 and will soon begin a fresh journey to N3,000/$1. The result is that importers and manufacturers have in turn continued to increase prices of their products on the basis of dollar exchange rate to Naira.
Perhaps what has been a sad event is the rate at which there is fluctuation in the rate of dollar to Naira.
The Naira keeps falling in value everyday to the dollar and other currencies, including those of the neighbouring West African countries. The current situation is that many citizens of other African countries who have been doing business in Nigeria are now returning to their home countries because of the fact that the Naira has fallen far below their own currencies. In other words, their currencies have become far stronger than Naira. Critics believe the devaluation of Naira against the Dollar and other currencies will continue to affect the economic life of the people negatively.
Prices of Goods
The rise in prices of goods in the market has left many dumbfounded. To worsen the matter is the Customs duties exchange rate introduced by the Central Bank of Nigeria. This is the rate the Nigeria Customs Service uses in calculating duties on imports. First, it was about N1,357.50 before it rose to N1,413.62. It later went up to N1,617.00 with information later that it went down to about N1,500.00. The rates have been introduced for more than 10 times in a month. While it is believed that with this scenario the Customs will make more revenue this year, triple what it made last year, yet such gains will have no positive impact on Nigerians. This is because prices of goods have continued to go up. Traders have become confused because every minute importers and manufacturers come up with new prices in relation to the prevailing exchange rate. To observers, this is destroying businesses. The policy has made international trade a big task because of the continued rising of the dollar rate against the poor value of the Naira. With almost everything being imported, including farmers relying on fertilizers and other foreign inputs, prices of food and other commodities have become so high for the low income group. This explains the reason for the protest in many parts of the country. Everyone appears sad. This includes the importers, manufacturers who also import raw materials for production. Dealers on different goods, wholesalers and retailers are all worried. The reason is that the goods are changing in prices every 30minutes as traders monitor the dollar rates. The final consumers are bitter as they find it difficult to pay for most of the goods they would want to buy. This has made market very dull. Even traders in the market are no longer buying to stock-up as they are afraid these goods are too expensive and final consumers are not ready to buy. Keeping them in the store for too long means taking risk of damages and therefore losses of investment.
As experts suggest, what government should do is for the CBN to discuss with the management of the Customs Service and arrive at one exchange rate under which duties can be calculated. Although it was gathered that the CBN has agreed that the rate of duties to be paid by importers will be based on the prevailing exchange rate when the Form M was opened, importers still argue that this policy will continue to affect businesses and prices of goods in the market. According to experts, this will not bring prices of goods down as importers will claim they sourced the foreign exchange at high rate of dollar exchange rate. An importer said if the government wants prices of goods to be affordable, CBN should rather peg the rate used in calculating duties at about N1,200 for it to be uniform for all. Other possibilities for prices of goods to come down is for the government to consider ensuring that fuel prices go down by using the gains of the subsidy removal to encourage private refineries to come on board as quickly as possible. These refineries should be expected to reduce their fuel prices since they source crude oil to be refined locally. Government should also not make the mistake of relying on big time monopolists who are likely to look for ways to suffocate other small companies. This was what happened in the case of cement manufacturing over the years which prices have now gone out of the reach of the low income earners. Government should be fast in acting outside the box to arrest the issue of continued rise in the prices of goods. The prices of food and other goods in the market should be affordable and the solution is in addressing the continued fall of Naira value to the Dollar and other currencies.
Many Nigerians are currently languishing in extreme poverty and this has in turn led to reactions from all parts of the country.
Perhaps, the problem started with the withdrawal of petroleum subsidy. The subsidy withdrawal as being feared over the years has come with pains of more transport costs which in turn led to rise in prices of goods in the market. But that was not all. The fall of Naira in value to other foreign currencies has been devastating for months now. The fall has been with speed. Early last year, the rate of Naira to Dollar was about N700/$1. Expectations were therefore that the new government would work out a way in which the exchange rate would come down. But instead of coming down, the dollar rate has kept rising to what it is now – over N1,900/$1. Observers hold the view that the Dollar can be said to have arrived at the doorstep of N2,000/$1 and will soon begin a fresh journey to N3,000/$1. The result is that importers and manufacturers have in turn continued to increase prices of their products on the basis of dollar exchange rate to Naira.
Perhaps what has been a sad event is the rate at which there is fluctuation in the rate of dollar to Naira.
The Naira keeps falling in value everyday to the dollar and other currencies, including those of the neighbouring West African countries. The current situation is that many citizens of other African countries who have been doing business in Nigeria are now returning to their home countries because of the fact that the Naira has fallen far below their own currencies. In other words, their currencies have become far stronger than Naira. Critics believe the devaluation of Naira against the Dollar and other currencies will continue to affect the economic life of the people negatively.
Prices of Goods
The rise in prices of goods in the market has left many dumbfounded. To worsen the matter is the Customs duties exchange rate introduced by the Central Bank of Nigeria. This is the rate the Nigeria Customs Service uses in calculating duties on imports. First, it was about N1,357.50 before it rose to N1,413.62. It later went up to N1,617.00 with information later that it went down to about N1,500.00. The rates have been introduced for more than 10 times in a month. While it is believed that with this scenario the Customs will make more revenue this year, triple what it made last year, yet such gains will have no positive impact on Nigerians. This is because prices of goods have continued to go up. Traders have become confused because every minute importers and manufacturers come up with new prices in relation to the prevailing exchange rate. To observers, this is destroying businesses. The policy has made international trade a big task because of the continued rising of the dollar rate against the poor value of the Naira. With almost everything being imported, including farmers relying on fertilizers and other foreign inputs, prices of food and other commodities have become so high for the low income group. This explains the reason for the protest in many parts of the country. Everyone appears sad. This includes the importers, manufacturers who also import raw materials for production. Dealers on different goods, wholesalers and retailers are all worried. The reason is that the goods are changing in prices every 30minutes as traders monitor the dollar rates. The final consumers are bitter as they find it difficult to pay for most of the goods they would want to buy. This has made market very dull. Even traders in the market are no longer buying to stock-up as they are afraid these goods are too expensive and final consumers are not ready to buy. Keeping them in the store for too long means taking risk of damages and therefore losses of investment.
As experts suggest, what government should do is for the CBN to discuss with the management of the Customs Service and arrive at one exchange rate under which duties can be calculated. Although it was gathered that the CBN has agreed that the rate of duties to be paid by importers will be based on the prevailing exchange rate when the Form M was opened, importers still argue that this policy will continue to affect businesses and prices of goods in the market. According to experts, this will not bring prices of goods down as importers will claim they sourced the foreign exchange at high rate of dollar exchange rate. An importer said if the government wants prices of goods to be affordable, CBN should rather peg the rate used in calculating duties at about N1,200 for it to be uniform for all. Other possibilities for prices of goods to come down is for the government to consider ensuring that fuel prices go down by using the gains of the subsidy removal to encourage private refineries to come on board as quickly as possible. These refineries should be expected to reduce their fuel prices since they source crude oil to be refined locally. Government should also not make the mistake of relying on big time monopolists who are likely to look for ways to suffocate other small companies. This was what happened in the case of cement manufacturing over the years which prices have now gone out of the reach of the low income earners. Government should be fast in acting outside the box to arrest the issue of continued rise in the prices of goods. The prices of food and other goods in the market should be affordable and the solution is in addressing the continued fall of Naira value to the Dollar and other currencies.
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