Customs duties exchange rate exceeds official market rate

The Nigeria Customs Service (NCS) has set its exchange rate for duties collection at N1584/$, surpassing the official closing rate of N1581/$ on the NAFEM window as of July 17, 2023, according to data from FMDQ. This marks a notable increase of N3 above the official rate.

This current customs duties exchange rate of N1584/$ is among the highest recorded since March 2024, when the naira saw a significant depreciation nearing the N1600/$ mark. Despite efforts by the Central Bank of Nigeria (CBN) to enhance foreign exchange supply, the naira has continued to weaken against the US dollar in recent times.

Last week, the Nigerian official foreign exchange (FX) market witnessed a substantial uptick in turnover, surging by 40% according to data compiled by Nairalytics from FMDQ. Turnover rose from $740.92 million in the previous week (July 1 to 5, 2024) to $1.03 billion in the current week (July 8 to 12, 2024). The last time weekly turnover exceeded $1 billion was in early June, totaling $1.05 billion.

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This increase in FX turnover follows the CBN’s active intervention in the market through the sale of dollars to authorized dealers. Notably, the CBN conducted a two-day sale totaling $122.67 million to 46 authorized dealers, aimed at stabilizing the exchange rate.

Dr. Omolara Duke, Director of Financial Markets at the CBN, disclosed that the bank sold $67.5 million to 27 authorized dealers and purchased $2.5 million from one dealer on Wednesday. Transactions were executed at bid rates ranging from N1,480/$1 to N1,500/$1, with settlements scheduled for July 12, 2024, following a two-day settlement cycle (T+2).

In a separate transaction last week Thursday, the CBN sold $55.17 million to 19 authorized dealers at a rate of N1,540.0/$1, with no purchases recorded. Payment for these spot sales is expected on July 15, 2024.

The CBN has emphasized that foreign exchange purchases from the bank must strictly be used for trade-backed transactions, with reporting requirements within 72 hours.

The gradual depreciation of the naira coincides with the CBN’s preparations for its fourth Monetary Policy Committee (MPC) meeting next week, where decisions on interest rate adjustments will be deliberated.