The chairman of the presidential committee on fiscal policy, Taiwo Oyedele, has explained the rationale behind the federal government’s rejection of a pegged or fixed exchange rate system for determining customs import charges.
In a statement on Tuesday, Oyedele clarified that since the recently repealed and reenacted 2023 Customs Act requires a market-driven exchange rate, the president cannot simply issue an executive order to create a fixed exchange rate for Customs duties.
Oyedele stated that his committee is trying to make sure that the law is changed soon to permit changes to exchange rates.
He underlined that the National Assembly must approve this change and that the government understands how crucial these measures are to making it easier for people to do business in the nation.
“The other point that my brother raised that our recommendation that the custom service should use a fixed exchange rate that is much lower than the actual rate hasn’t been implemented. And it’s a number of factors.
“The biggest one being that the Nigeria Custom Service was repealed and reenacted in 2023, which is last year. And in that law, it says that the exchange rate to use for Custom must be the official exchange rate, which means even though we drafted an executive order, the president cannot just sign to override the law.
“We then have to grow through the process of trying to change the language in the law so that when it becomes necessary, maybe later in the future, it will not be as complicated as it is now. But I think there’s a general understanding within government that these interventions are extremely important,” Oyedele explained.
Withholding Tax Regulations Are Now Published
Oyedele said that the federal government has now gazetted the new withholding tax legislation.
He stressed that after receiving consent from all levels of government, the implementation would start on Wednesday.
Oyedele states that the country’s small firms and manufacturers should benefit to some extent from the new restrictions.
“I do have some good news. The good news is that the withholding tax regulation has now been gazetted. The only reason why it hasn’t been published today is because it’s a public holiday. So first thing tomorrow, you’ll see a copy of the gazette.
“And that provides a lot of relief not only for manufacturers, but also for every other businesses in terms of taking away some of the burden about funding their working capital, even their interest rate,” he added.
What To Note
One of the biggest challenges facing those involved in import and export is the currency rate volatility associated with customs import charges.
Manufacturers and importers are forced to largely rely on a replacement cost model because the exchange rate is often linked to fluctuations in the value of the naira relative to the dollar and complicates trade planning.
Furthermore, interested parties like the Manufacturers Association of Nigeria (MAN) have pushed the federal government to set import tariffs to facilitate trade inside and outside the nation.
Given the naira’s volatility in the foreign exchange market, a variable exchange rate for customs taxes is detrimental to fostering effective commerce.
