New Customs Duty May Push Inflation Above 18% | Independent Newspapers Limited
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New Customs Duty May Push Inflation Above 18%

Posted: Jul 7, 2016 at 4:32 am   /   by   /   comments (0)

Isuma Mark

Abuja – The introduction of 43% customs duty on imported cargoes may likely push Nigeria’s inflation rate to yet unprecedented high of 18%.

The nation’s current inflation rate stands at 15.6% in May and expected review of all economic indicators before the current new customs policy had led to a projection of a slight increase of one percent.

However, the Central Bank of Nigeria’s (CBN) new forex regime has rather served as early catalyst to edge up prices of goods. Especially affected are imported goods.

Naira currently exchanges for between N285 and N295 from a pegged rate of N197 to a dollar in CBN’s open market policy. Black market rate is between N345 and N370.

According to a recent circular issued to all zonal coordinators and Customs Area Controllers, all relevant provisions in the Customs and Excise Management Act (CENA) on the evaluation of duty for cargoes should be applied and adhered to strictly.

In the circular signed by the Deputy Comptroller-General, Tariff and Trade, Nigeria Customs Service, A. Adewuyi, it said, “In consonance with the provisions of CEMA on the evaluation and clearing of imported goods into the country, Mr. President has approved the use of the exchange rate at the time of making entry as provided in CEMA, Customs and Excise Notice No.13 on the value of imported goods.

“Where the value of an imported good is shown in foreign currency such value is to be converted to the equivalent Nigerian currency as at the rate at the time of making entry. The current rates of exchange are published at the Customs House”, noted the circular.

The circular said the Comptroller-General of Nigeria Customs Service, Col. Ahmed Ali (rtd.), had directed that all declarations in respect of imported goods whose values were shown in foreign currencies must comply with the provision.

Importers though are still facing hard times meeting their overseas obligations despite the open window FX policy. There are fears that a nation almost wholly dependent on import cannot afford to have FX crisis without appropriate remedy.

An official of the National Bureau of Statistics, who spoke with our correspondent on phone, explained that there are strong indications for inflation to rise again.

According to him, it is common knowledge that an import-dependent country like Nigeria would face similar rise in inflation.

“Currently, we produce nothing as against previous years. Our last report which showed rise in headline inflation is a pointer to an increasingly deplorable situation,” he said.

“Factories are closed because of lack of raw materials and power. The consequence is loss of jobs. Everybody feels it is okay to import because one must do business one way or the other. If producers find it impossible to produce locally, they import.

“Again, there are no activities in the economy by way of government’s expenditure. The government is not putting money where its mouth is to rescue the economy. Investment from government is very poor when you feel to encourage foreign direct investors, the government needs to spend and open up the system. That is why lack of investors’ confidence has made them stay away,” he pointed out.

“Local investors cannot do it alone and they are not even doing it. Government cannot do it alone and they are not even doing it. Never has Nigeria been wholly dependent on importation. The situation is dire.

“So expect rise in inflation because as you already pointed out, Customs too have keyed into the new FX regime. It is not as if importers have easy access to FX now, they still struggle.

“It is by extension a general crisis. That has also manifested in the Skye Bank crisis and few other banks too are in the same position. I think the CBN is trying to keep the lid on them but the liquidity crisis that affected Skye Bank is also affecting other banks,” he added.

In his projection, inflation is likely to rise to 18% basis point. “This would be made known when economic activities up to July are analysed. For now, we can only say it would rise in actual fact. And that projection too is a modest one. We may be wrong but expect a rise.”