The Nigeria Customs Services (NCS) has experienced a significant drop in the foreign exchange rate for cargo clearance at ports and other goods entry points, with the rate declining to N1260.49/$ from N1330/$ in recent days.
This decrease represents a substantial decline of approximately N70 for cargo clearance transactions. The new exchange rate mirrors the closing rate on the official Nigerian Autonomous Foreign Exchange Market (NAFEM) window, where the naira closed at N1255/$.
The downward trend in the exchange rate used for import duty payments on the customs portal has been evident over the past two weeks, reflecting the strengthening of the naira in the foreign exchange (FX) market. From its peak at N1,624.7/$1, the rate has steadily decreased to its current level. This adjustment in the exchange rate aligns with the prevailing official market rate, a practice confirmed by the Customs Service, which frequently adjusts rates in line with market dynamics.
However, the fluctuating nature of the customs exchange rate has not been without challenges. The frequent changes have prompted concerns from stakeholders, including the Nigerian Customs boss, who highlighted the impact on trade in the country. Notably, in the first quarter alone, there were approximately 28 different exchange rates for cargo clearance, underscoring the need for stability and predictability in the exchange rate regime.
In response to these concerns and in pursuit of broader economic stability, the Central Bank of Nigeria (CBN) has implemented various reforms aimed at stabilizing the forex market, curbing speculative activities, eliminating pricing irregularities, and bolstering the naira’s strength.
CBN’s Reforms Drive Exchange Rate Alignment and Stability
The alignment of official and parallel market exchange rates underscores the effectiveness of the CBN’s foreign exchange market reforms. These reforms encompass several measures geared towards enhancing market transparency, promoting liquidity, and fostering exchange rate stability.
One key reform involves imposing limitations on International Oil Companies (IOCs), requiring them to repatriate only half of their foreign exchange earnings immediately, with the remainder subject to a 90-day waiting period for remittance. This measure aims to mitigate excessive demand for foreign exchange and reduce pressure on the naira.
Furthermore, commercial banks are now prohibited by the central bank from utilizing profits from foreign exchange sales for operational expenses and dividend disbursements. This directive aims to channel foreign exchange earnings towards productive sectors of the economy, thereby supporting economic growth and stability.
In a recent development, the CBN initiated the provision of dollars to Bureau de Change (BDC) operators at a fixed price of N1,251 per dollar. This measure seeks to ensure uniformity and predictability in the exchange rate, thereby enhancing market confidence and reducing arbitrage opportunities.
As the CBN continues to implement these reforms and other measures to address forex market challenges, stakeholders anticipate further improvements in exchange rate stability, which will ultimately support economic growth and development in Nigeria.
In conclusion, the recent drop in the foreign exchange rate for cargo clearance signals a positive development for trade facilitation in Nigeria. Coupled with ongoing reforms by the CBN, including measures to align exchange rates and enhance market stability, the outlook for the forex market appears promising. With concerted efforts from regulatory authorities and market participants, Nigeria is poised to achieve greater exchange rate stability and economic resilience in the face of global uncertainties.
