Stakeholders kick as CBN increases exchange rate for Customs import duty 

Chinazor Megbolu    |   

Recently, the Central Bank of Nigeria (CBN) increased exchange rate for cargo import from N361 to N381 per one dollar.

 

Stakeholders, especially the importers, condemned the move, which they said would definitely make cost of importing cargoes through the nation’s ports increase by 5 per cent.

 

Recall that the new increase took place five months after it was first adjusted from N326 to N361 per dollar by the same CBN for all imported goods coming into Nigeria.

The CBN had already abolished or banned middlemen in the opening of Form M, which has led to misgivings amongst stakeholders in the maritime sector.

 

 The stakeholders noted that dealing with manufacturers directly would be difficult unlike before where middlemen did the jobs on their behalf.

Again, the importers did complain that the CBN never consulted them before the new rate was adjusted.

They stressed further that they would be paying the exchange rate to bring cargoes to the port, adding the vessels awaiting berth had already gone up from 24 per cent to 46 per cent from 37 as of July 2020, which led to massive congestion at the Lagos ports.

Moreover, the CBN didn’t stop at that, the apex bank in fulfillment its earlier promise towards introducing a product price verification mechanism for imported items published the first HS Codes unit costs list, which is to guide banks, as well as all authorised dealers in foreign exchange in the verification of quoted prices of imported items before Form Ms, are approved.

The CBN also eliminated rent seeking agents in import payments where CBN in its effort to ensure the judicious use of Nigerian foreign exchange earnings and to avoid incident of over-invoicing, transfer pricing and double handling charges on items imported into the country.

The CBN also issued advice to financial institutions and foreign exchange dealers to desist from honouring Form-M requests from buying agents and other third parties.

The CBN in a circular of August 24, 2020, also promised to introduce Product Price Verification Mechanism (PPVM), which would be used by authorised dealers in foreign exchange to verify prices of products before Form Ms are approved.

Last Wednesday, CBN signed a circular stating that electronic insurance policy certificate has now become mandatory for all importers who wish to obtain Form M.

The circular, signed by the Director, Trade and Exchange Department, Dr. O.S. Nnaji, maintained that importers are now required to provide digital marine insurance certificate with e-Form on the Nigeria trade portal.

“This is to inform all authorised dealers, Nigeria Customs Service and the general public that the Nigerian Insurers Association digital marine insurance certificates have been integrated with e-Form M on the Nigeria trade portal.

“Consequently, the NIA’s marine insurance certificate shall with effect from Monday September 14, 2020 be part of documentation requirements for the processing of e-form M.

“For the  avoidance of doubt, the use of hard copy marine insurance certificates for processing e-Form M is hereby discontinued from the effective date of this circular,” the circular stated.

In his remarks, the National Vice President, National Association of Government Approved Freight Forwarders (NAGAFF), Dr. Segun Musa noted the action is a monumental business disaster in Nigeria as the NCS concessionaires would soon begin to dictate their mandates through the CBN Governor, Mr. Godwin Emefiele. 

He explained the CBN under the pretense of controlling the usage of the forex, encouraged local capacities and preventing over-invoicing.

Musa maintained that all these would bring about a fraudulent policy that is capable of nosediving the country’s economy and plunging it into a long-lasting recession. 

“The new control for the issuance of Form M is not only an intellectual fraud but a targeted attempt to create massive joblessness and hardship in the country. 

“Simple economics teaches principles of comparative advantage that encourage people to concentrate on what they have a comparative advantage over rather than where they lack capacities unlike the CBN governor often promotes. 

 

“It is also a common knowledge that foreign manufacturers do not often sell piecemeal to retailers and they rather nominate wholesalers or agents with huge capacities to buy bulk and look for smaller distributors globally to buy from them,” Musa said.

Additionally, he posited that the aforementioned is where most of our companies in Nigeria derives their patronage and credits/incentives, which facilitates keeping their businesses afloat.

According to him; “with CBN eliminating the threshold sustaining businesses and cluelessly expecting entrepreneurs struggling to survive to source for huge capital without any single support from government and become agents to foreign manufacturers is definitely a joke taken too far. 

“I can understand the CBN team from the governor to the directors to be either bankers or political appointees without any full-fledged knowledge of practical businesses aside the usual theoretical concepts but notwithstanding usage of common sense should suffice here. 

“We are fully aware that CBN governor is seriously under pressure by government to promote clueless business ideologies just to satisfy the interests of the buyers of Nigeria Customs.

Musa urged all
business cluster groups to wake up from their slumber and challenge the government in order to get out of the mess they suddenly found themselves.

“It’s obvious that the government is confused and urgently needs help from all of us before the economy is ruined out of ignorance. 

 

“The NCS often argue that values declared on the generated PAAR are low at the points of physical examination in the ports whereas the CBN is arguing that they are often over-invoicing and leads to capital flight. 

“Who do we believe among the two government departments?

” This simply shows the government is not coordinated in such a way to add value to businesses but rather interested in revenue collections. 

“The concessionaires have paid our government for the purchase of the NCS and we are aware that majority of the officers would be shown the way out soon or later by the buyers but our appeal to both the government and the customers that have just bought a juicy agency (NCS) is to take it easy with the business community otherwise everyone would be a loser and the economy would be grounded,” Musa warned.

Another stakeholder and a former member, Council for the Regulation of Freight Forwarding in Nigeria (CRFFN)’s Freight Forwarders Consultative Forum, Mr. Chidi Anthony Opara,  said the exchange rate increase by CBN is a way of showcasing the realistic strength of the Naira in the international market.  

According to him; “our import-dependent economy, which results in the imbalance of trade against Nigeria have greatly weakened the naira over time”. 

On the third party Form M registration, he pointed out it may have its advantages, but quickly added it has its disadvantages, which outweigh the advantages. 

Opara averred that the only major advantage of third party Form M registration is that it enables small and medium traders to source supplies from several small and medium sources and not necessarily waiting for big suppliers who may not be disposed to do retail sales.

“Third party Form M registration, however, puts pressure on the slim foreign exchange wallet of the country.
“Every small and medium trader would apply to be allocated foreign exchange to import, instead of relying on the big importers for supplies,” Opara said. 

He also stated that third party Form M registration also makes foreign exchange monitoring and control by CBN cumbersome. 

Opara, however, hinted that the large volume of foreign exchange applications, allocations and usage present difficulties in monitoring and control, adding that the most glaring difficulty being that of pre-importation offshore price verifications of goods and services.

With the increase in the foreign exchange rate on cargo import and the abolishment of middlemen, will it not lead to the abandonment of containers? 

Thereby causing congestion that operators and stakeholders have been yearning against.

The end-users, who are the masses, will end up being the worst hit. 

As importers and other stakeholders wail and groan, the question remains, which way forward for ease of doing business in Nigeria?