By Godswill Odiong
In a move that has sparked widespread concern, the Central Bank’s recent decision to increase the customs exchange rate from N783 to N952/$ is facing strong opposition from businesses and advocates alike. Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), warns that this adjustment will compound the already challenging landscape for businesses, potentially aggravating poverty and economic woes.
The Central Bank’s exchange rate adjustments have been frequent, with changes occurring on June 24, July 6, and November 14, leading to the current rate of N951.941/$. Critics argue that these rapid adjustments contribute to uncertainty for investors, creating an unpredictable international trade environment.
He underscores these concerns, stating, “We need to develop stronger frameworks for measuring the human condition and ensure that policymakers and business leaders pay as much attention to these measures as they do to macroeconomic indicators.” The CPPE’s appeal for a more considerate approach to economic policies reflects the growing tension surrounding the impact of such decisions on businesses and citizens.
Businesses are already grappling with severe macroeconomic challenges, including persistent currency depreciation, high energy costs, and weakened investor and consumer confidence. The CPPE contends that the timing of this exchange rate increase is unfortunate, further hindering access to intermediate products for manufacturers and exacerbating the difficulties faced by businesses.
Dr. Muda Yusuf strongly appeals to the Central Bank and the Coordinating Minister of the Economy to reconsider the decision, emphasizing that trade policy measures should not be entirely dictated by market forces. The CPPE proposes a concessionary rate for import duty computation, suggesting a fixed customs duty rate at 20% less than the official exchange rate to mitigate inflationary pressures.
The potential consequences of the recent exchange rate hike, as outlined by the CPPE, include a rise in smuggling, possible industry shutdowns due to increased import costs, declining customs revenue, and a worsening situation for inflation and poverty. The CPPE also warns of heightened corruption risks in the international trade ecosystem and an influx of substandard products.
Despite recent statements by the CBN governor emphasizing the human impact of economic policies, critics argue that the current decision seems at odds with this sentiment. The CPPE recommends a review of the exchange rate increase and calls for a reduction in the frequency of rate adjustments to minimize uncertainty and risks for investors.
