Tax Reform Committee recommends fixed rate of N800/$ for import duties

The Presidential Committee on Fiscal Policy and Tax Reforms has recommended that the federal government adopt a fixed exchange rate of N800 per dollar for customs import duties. This proposal was put forward by Taiwo Oyedele, the chairman of the committee, during a press briefing in Lagos on Thursday.

Oyedele underscored the challenges businesses face due to the fluctuating import duty rates, which are heavily influenced by the volatile foreign exchange (FX) market. He stressed the importance of stability to facilitate better business planning and fiscal predictability.

“When we drafted the budget, we assumed an exchange rate of N800 to the dollar. Now, it has surged to over N1,000. Businesses need to be able to plan effectively,” Oyedele explained. “Therefore, we are requesting the government to issue an order that for the purpose of paying import duties, a fixed rate of N800 per dollar should be used for the rest of the year until December. This is our proposed solution.”

The Nigerian Customs Service (NCS) has frequently adjusted the FX rate for import duties, aligning with the recommendations of the Central Bank of Nigeria (CBN) based on prevailing market conditions. As of May 27, the customs rate was set at N1,480 per dollar, a substantial increase from previous rates.

Context and Background

Nigeria’s import duties are significantly impacted by the fluctuating FX rates, which can create financial uncertainty for businesses involved in international trade. This volatility can disrupt planning and budgeting, leading to increased costs and inefficiencies. The proposed fixed exchange rate aims to provide a more stable economic environment, thereby fostering better business operations and economic growth.

The recommendation comes amid broader efforts to reform Nigeria’s fiscal policies and enhance the efficiency of tax administration. The stability offered by a fixed exchange rate could help mitigate some of the economic challenges exacerbated by the recent depreciation of the naira.