Nigeria: CBN Directs Customs to Use FX Closing Rate for Import Duty Assessment

The Central Bank of Nigeria (CBN) has issued a directive instructing the Nigeria Customs Service to apply the foreign exchange (FX) closing rate on the date of the ‘Form M’ submission by importers for the assessment of import duties during goods clearance.

This decision comes in response to the volatility and frequent updates on the customs website regarding the liberalization of the foreign exchange market. The ‘Form M’ is a mandatory statutory document used by importers for the declaration of intention for the importation of physical goods into Nigeria.

The circular, signed by Hassan Mahmud, the Director of Trade and Exchange Department at CBN, emphasizes the importance of using the FX rate on the date of opening the ‘Form M’ for importation as the rate for import duty assessment. This rate will remain valid until the completion of the importation and clearance of goods by the importers.

Starting from February 26, 2024, the closing rate on the date of opening the ‘Form M’ will be the applicable rate for assessing goods and services. This directive supersedes the requirement of Memorandum 9, J (2) of the Central Bank of Nigeria Foreign Exchange Manual (Revised Edition) 2018.

The CBN believes that this approach will provide a more stable framework for planning and reduce uncertainties related to varying exchange rates during the assessment of import duties. It acknowledges the initial volatility and price distortions following the FX market liberalization but expresses confidence that these reforms will contribute to market stability and instill confidence necessary for attracting investment capital to foster the growth of the Nigerian economy.

Since the unification of the foreign exchange market in June 2023, the naira has experienced a significant depreciation on the official window, losing over 100% of its value. This, coupled with other fiscal policy initiatives like the removal of fuel subsidy, has contributed to a 28-year high inflation rate, reaching 29.90% in January 2024. The inflation is driven by factors such as food and transport, with food inflation at 35.4% in January.